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Who's Afraid of Rupert Murdoch?

Produced and Directed by: Jim Gilmore
Senior Producer: William Cran
Correspondent: Ken Auletta
Written by: Ken Auletta, Jim Gilmore, and Paul Judge

 

ANNOUNCER: So who is Rupert Murdoch?

ANDREW NEIL, Former Editor, "The Sunday Times": Ruthless, aggressive, buccaneering--

ANNOUNCER: Just an incredibly successful entrepreneur?

TOM SHALES, T.V. Critic, "The Washington Post": One powerful dude.

ANNOUNCER: Or is he the robber baron of the information age?

ROBERT SPITZLER, Former Managing Editor, "New York Post": Rupert has no geographical boundaries now.

ANNOUNCER: Maybe you should know.

EXPERT: I don't think Rupert believes in government.

ROBERT SPITZLER: Dangerous character.

Rupert wants to be king of the world.

ANNOUNCER: Tonight, correspondent Ken Auletta asks "Who's Afraid of Rupert Murdoch?"

BAILIFF: All rise.

COURT CLERK: All persons having business with the United States District Court draw near. Raise your right hand repeat after Judge Martin.

Judge MARTIN: I hereby declare--

NEW CITIZENS: I hereby declare--

Judge MARTIN: --on oath--

NEW CITIZENS: --on oath--

KEN AULETTA: Once a week immigrants from across the globe come to a lower Manhattan courtroom in search of the American dream. Rupert Murdoch dreamed of starting a new television network in the U.S., but there was an obstacle: He was a foreigner. No problem. He became an American. And so on September 4, 1985, this new citizen, Murdoch, was free to expand his media empire throughout the United States.

ANNOUNCER: [television commercial] Fox has rewritten all the rules.

And the next revolution--

KEN AULETTA: Operating on six continents, Rupert Murdoch is like no media mogul ever-- one man controlling T.V., cable, satellite, movies, books, magazines, Internet access and newspapers.

ANDREW NEIL, Former Editor, "The Sunday Times": Murdoch's ruthless, aggressive, buccaneering, incredible entrepreneur and someone who nobody is neutral about.

RANALD MACDONALD, Rupert's Cousin: I think he feels he has been the underdog fighting against the establishment, that he has won through providing people with what they want.

THOMAS KIERNAN, Biographer: That's what he's built his empire on. He indulges and makes money off sex and sensationalism.

MAX SUICH, Newspaper Editor: I think he's driven by a genuine desire to be extremely rich.

JAMES BRADY, Former Murdoch Editor: He is partially motivated by power. I think he loves the idea that presidents and prime ministers pick up the phone and call him and say, you know, "Rupert, you'd be a big help to me if and so."

ANNOUNCER: [promotional video] News Corp, a leader in the rapidly expanding global media market.

TOM SHALES, T.V. Critic, "The Washington Post": Murdoch is someone who seems to have been allowed to grow unchecked, like-- you know, like some sort of monster in a science fiction movie, The Blob or something. And you keep waiting for somebody to sort of shape him up and push him back in, but it doesn't happen.

KEN AULETTA: Murdoch has been warring with rules and regulations his entire life. He scorns government interference, seeing himself as an anti-establishment, free-market buccaneer.

RUPERT MURDOCH: I don't know. I've only read the rumors in the papers.

KEN AULETTA: In the spring of 1995, the FCC was threatening to clip his wings. The claim was that he had subverted the rules on foreign ownership and had misled the commission.

To me, Rupert Murdoch remains as fascinating and sometimes frightening as he did when I first started writing about him two decades ago. After first agreeing to take part in this documentary, Murdoch reneged, saying he distrusted PBS. He did talk to me, however, for a profile I was writing for the New Yorker.

He can be what one most admires in a businessman-- bold, decisive, and willing to take the long view. But he is feared because what he produces can be viewed as toxic to our culture and our democracy.

ROBERT SPITZLER, Former Managing Editor, "New York Post": Rupert has no geographical boundaries now, which makes him a vastly more important and perhaps dangerous character than any press lord, media baron who's ever come down the pike.

KEN AULETTA: This global tycoon grew up a privileged boy on the other side of the world. It was here, at Australia's elite Geelong Boarding School, where the seeds of Murdoch's anger against the establishment were first planted. As the son of a prominent newspaperman, he was shunned by the sons of Australia's establishment.

RANALD MACDONALD: He was unhappy and he was rebellious. He made few friends because those who came from old money felt that Rupert Murdoch, somehow, coming from the newspaper world, was, you know, not quite their equal. I suppose the point about Sir Keith Murdoch is that he was incredibly successful as a journalist and as building a huge empire, the Herald and Weekly Times, the most powerful media organization in Australia. And he was looking to continue the Murdoch dynasty in newspapers.

KEN AULETTA: But keith murdoch's son and heir showed scant signs of promise. As a teenager, he liked to sneak off to the local racetrack.

RANALD MACDONALD: He's a bit of a larikan, as we would refer to it in Australia, a person who's unconventional, a bit rough around the edges. He's always been, and I would think even in those days, he's reputed to have been a good gambler, sometimes even took the book. A good gambler is a person who will cut his losses if the situation is going against him, won't just double up and double up and double up. And Rupert, right throughout his career, has done that.

KEN AULETTA: He had one other schoolboy passion-- newspapers.

DARRELL WARDLE, Geelong Schoolmate: It was almost, in a sense, an extra subject for him to study. Newspapers really gripped him in a sense that the average newspaper reader doesn't have.

KEN AULETTA: At school he helped to publish a school magazine called If Revived.

DARRELL WARDLE: He would be able to immediately say, "This is well made. This is a good layout. This is a bad layout."

KEN AULETTA: If young Rupert's interest in newspapers pleased his father, his sophomoric politics did not.

THOMAS KIERNAN: His mother once told me a story about how Rupert used to get under his father's skin by uttering Leninist statements at the dinner table and starting arguments with his father. And the one phrase that particularly riled Keith Murdoch, the-- or Sir Keith Murdoch, as he was known then, was Rupert's characterization of Lenin as "the great teacher."

KEN AULETTA: In 1950, Murdoch went to Oxford University, where he found himself an outsider once again.

THOMAS KIERNAN: When he arrived at Oxford, he was not that well received. He was just another Australian from down under. So he responded to that. He responded to that kind of snubbing he got and became very anti-British.

GEORGE MASTERMAN, Q.C., University Friend: He was very interested in politics and radical politics in particular and he had a bust of Lenin on the mantelpiece. He was a self-confident, arrogant, cocky, rich and, seemingly to the English, a communist. And the whole mixture, the cocktail, obviously got a number of his fellow students off-side.

HARRY PITTS, University Tutor: I doubt if he had very much knowledge of who Marx was, at the time, but he thought the poor got a raw deal and that kind of thing. But it didn't stretch very far, I think. I mean, he was never going to be a social worker.

KEN AULETTA: Murdoch made a real effort to have a good time. He loved driving out to country pubs and sleeping late. Even then, he was intrigued by politics, but when he ran for office in the Labour Club, he got in trouble for breaking rules that frowned upon self-promotion.

THOMAS KIERNAN: He went out and campaigned, plastered Worcester College with circulars and handbills, and passed out brochures and what have you, promoting his candidacy and he was disqualified for that reason. He breaks the rules, sometimes, of gentlemanly conduct and he's made a career of doing that.

KEN AULETTA: But Murdoch's Oxford days were suddenly interrupted. In October, 1952, he rushed home to melbourne. Sadly, he arrived too late for his father's funeral.

PAUL JOHNSON, Newspaper Columnist: His father was an extremely successful newspaper manager. He never had a big share of the equity, but he built up quite a considerable empire. But of course, when he died, he wasn't actually able to leave Rupert much. So, as it turned out, he only got one paper, not a particularly important one.

KEN AULETTA: In his will, Sir Keith said he hoped that Rupert would spend a useful, altruistic life in newspapers and broadcasting, if, he added, the trustees considered Rupert worthy of that support.

THOMAS KIERNAN: According to his mother, his father was somewhat critical of Rupert as a young man and occasionally questioned whether Rupert had it in him to take over whatever his father had built.

KEN AULETTA: To gain some practical newspaper experience, Murdoch returned to England and a job on Fleet Street, the epicenter of the dog-eat-dog world of the British press.

RANALD MACDONALD: His father had filled him with all the stories about Fleet Street. I think Rupert Murdoch felt that Fleet Street was the place to go and that was where all the action was.

ANDREW NEIL: The British newspaper industry operates in the most competitive environment in the world because all the main newspapers are national-- 12 national newspapers, all slogging it out for market share, and the competition is very, very tough.

KEN AULETTA: Murdoch got a job working as a copy editor on the Daily Express. Here he learned about splash headlines, double-page spreads, human interest sidebars, and sports. He came to believe newspapers were meant to entertain, not educate.

Before long, he was ready to return to Adelaide and the small town paper his father had left him. He was just 22 years old.

DAVID BOWMAN, Former Reporter, "Adelaide News": He was a rather brash young man. He exuded energy. He carried a good deal of puppy fat and he had this boyish way, boyish demeanor. He was someone who I felt, at the time anyway, would want to be a hands-on man.

DAME ELISABETH MURDOCH: [1967] I did long to be able to help Rupert to prove worthy of his father and though many of my husband friends in the industry and his colleagues, I'm sure, felt a kindliness towards Rupert, but on the other hand, very natural that their-- perhaps their kindness was a more paternal kind. And when it came to-- when the chips were down, when this young man was trying to make his way, it wasn't very easy.

KEN AULETTA: His father's former colleagues, who owned the competing paper, saw Rupert's inexperience as an opportunity to put him out of business. This was when Murdoch came to believe business was war.

RANALD MACDONALD: Rupert Murdoch took on the establishment and he took on the establishment angrily because he was very unhappy about being robbed what he felt-- of what he felt was his birthright.

DAVID BOWMAN: He decides to fight. There's really no alternative, if he's going to stay in newspapers in Adelaide and use that as a base from which to expand.

RANALD MACDONALD: Well, what he simply did was use all the means at his disposal to undercut the opposition in advertising rates, in giveaways, in marketing. And he didn't mind if he took losses. The interesting thing is he never has minded. He's always recognized he's in for the long haul, the long game. They didn't think he was and they felt they could cut him to pieces just simply by being bigger. And they couldn't.

KEN AULETTA: It took him two years, but Murdoch won the circulation war. The two papers merged, but on Murdoch's terms. His company, News Ltd., won the right to print, manage and therefore keep most of the profits. His victory in Adelaide put people on notice Rupert Murdoch was not to be underestimated.

DAVID BOWMAN: Rupert was carving out a considerable reputation for himself in Adelaide by now. I'm sure that it must have given him great confidence to charge ahead, perhaps charge ahead more quickly than he would otherwise have done.

KEN AULETTA: Murdoch went on the offensive. He took his profits from Adelaide and began buying up small papers all across Australia.

RUPERT MURDOCH: We were a very small company, to start with, and we could just take the opportunities which we could afford, so therefore we tended to take the sick newspapers, the ones that weren't worth much, that people felt were about to fold up. And by energy and drive and getting people around us who were good, we managed, in most cases, to turn the corner.

MAX SUICH: His big move was to come to Sydney, where he bought a chain of suburbans, once again, at a time when suburbans weren't fashionable. This was in the '50s, late '50s. And then he did one of those famous deals. He bought a second-rate, knocked-out afternoon newspaper in a city with three others and they actually sold it to him on the assumption that he'd go broke. Ho, ho, ho.

KEN AULETTA: Going beyond the lessons he learned on Fleet Street, he took his papers down market and upped circulation dramatically.

THOMAS KIERNAN: He went right to the lowest common denominator-type of journalism, which was already in Australia, but he just outdid the other papers, the rival papers.

RUPERT MURDOCH: [July, 1967] I'm not ashamed of any of my papers at all and I'm rather sick of snobs that tell us that they're bad papers, snobs who only read papers that no one else wants. I doubt if they read many papers at all. And whereas on most issues they consider themselves liberals or radicals or something, they think they ought to be imposing their taste on everyone else in the community.

KEN AULETTA: When television came to Australia in the mid-'50s, Murdoch was quick to spot the potential profits. He bid successfully for a license in Adelaide. His channel 9 broadcast a line-up of local programs and cheap reruns from America.

GRAHAM KING, Former Murdoch Promotions Director: One of the deals that I remember well was a package of 400 cheap Westerns. You recognized them by the fact that the same bit of cactus you saw and the same rocks you saw that the horses galloped past. And it worked out at $7 a play and this is about the same amount today that a person would go in an rent a video for. When Rupert heard the price of this, he said, "Right. Every night is ranch night."

KEN AULETTA: Murdoch was determined to own more than one small television station. He set his sites on Sydney, the largest market in Australia.

MAX SUICH: Politicians in power at the time provided the licenses to their media friends and Rupert was excluded from that because he wasn't a media friend. He wasn't a media enemy, he was just a small-time, small-newspaper tabloid owner who didn't count.

GRAHAM KING: There was a small television station in Wollongong, which is a small town about 40 miles south of Sydney, and it went broke. It went bankrupt and Rupert negotiated to take it over. But what-- it wasn't the station itself that interested him because it had a small rural audience which was never going to make a huge amount of money. What he did was to point the transmitter towards Sydney and threaten the big Sydney operators. If a door was closed to him, he kicked it in or found a key somewhere or other.

KEN AULETTA: To defeat the bigger, stronger stations, he had to do something else. Murdoch knew that every year the bigger stations came to New York City to buy shows from the American networks. Together the Australians, acting as a club, had agreed to a spending cap in order to keep costs low. In luncheon meetings with the networks, Murdoch displayed a willingness to defy those club rules.

DONALD COYLE, Former President, ABC International: Rupert suddenly appeared as a new buyer with a checkbook in hand and was prepared to outbid the cap that the other people had set. It was a tremendous gamble because there was no way in which he had assurance that he would ever be able to recoup what he had to pay for all Australian rights for this material.

RUPERT MURDOCH: I went over to America and bought every new program from every network that was available for a year and spent nearly $3 million to buy Australian rights. Meanwhile, the existing people here sat around and said that they'd let me go broke, that I was making-- this was my really fatal mistake and I would go broke on this.

DONALD COYLE: There was an instinctive desire to gamble, apparently, and the chips got bigger as time went on.

KEN AULETTA: During his trips to America, Murdoch would often hit the tables in Las Vegas. In business and in life, Murdoch never plays it safe. He always gambles. Usually he wins.

DONALD COYLE: The other network operators in Australia sent their people and they were two or three weeks after Rupert had made his acquisitions that they found that there was nothing they could buy. So they had to deal with Rupert if they wanted to have programming for their markets.

RANALD MACDONALD, Newspaper Managing Director: Rupert has always recognized that what you pay for an opportunity, what you pay for something, may occasion, it turns out that you get it at a bargain price if you're in early.

KEN AULETTA: In 1964, Murdoch had a vision: to create Australia's first national newspaper, The Australian. He built it from the ground up and would subsidize it for 20 years before it earned a profit.

INTERVIEWER: [July 1967] Could you describe which of your newspapers you care about most?

RUPERT MURDOCH: Oh, The Australian, I think. Certainly, at the moment. It's been the greatest challenge and the biggest-- certainly the biggest task that I've had, the biggest challenge that I have put before me in life yet is to establish this paper and overcome the obstacles that we have. We still have more to overcome yet.

ADRIAN DEAMER, 3rd Editor, "Australian": I think his idea was that a more serious quality paper would give him more influence and more recognition as a person of intent, you know, rather than just a man making money out of newspapers.

MAX NEWTON, 1st Editor, "Australian": Well, he has this great ability, as a managing director, to get into the detail of the organization. He carries this to extraordinary lengths. In the first four or five months, probably, I think, up until the time I left The Australian, Rupert would quite often be seen down on the stone, making up the paper. You know, this-- this bloke's running an organization of X papers and millions of pounds, [unintelligible] there he is with a piece of lead, making up the paper. Very unnerving.

KEN AULETTA: If you work for Murdoch you always sense Rupert's watching.

RUPERT MURDOCH: [at editorial meeting] I like it very much. It's just a question of layout there. I thought those maps, the big map here, might have been more effective if it was a full half-page, on the front, perhaps, or on page three. By the time people pull it out and turn it around, they got to do all those things before they realize it's not an ad.

MUNGO MacCALLUM, Former Political Reporter, "Australian": The head office was in Canberra because Rupert felt, as a national paper, it symbolically should be edited from the national capital. But the printing presses were in Sydney, Melbourne and Perth and that meant that the paper was produced down to the stage of the matrices in Canberra. The matrices then had to be shoved onto a light aircraft or a couple of light aircraft to go to Sydney and Melbourne, where the paper was printed.

Rupert himself was absolutely fanatical about getting the paper out every day, come what may. And on occasion, he'd drive the mats out himself from the Canberra city office to the airport. Now, Canberra is a fog hole in winter. The airport's closed about three days out of every seven.

ADRIAN DEAMER: Rupert was supposed to have come out one night in his pajamas and his dressing gown, shouting at the pilot, "You can take off! You can take off!" You know, the fog all around over there and Rupert saying, you know, "Off you go!"

MUNGO MacCALLUM: Nobody really expected The Australian to succeed, but as it did succeed and it created a-- very much a niche among a particular group of fairly influential people, then Rupert began to be taken much more seriously by the politicians and I think his horizons widened a bit. He started to think of himself as somebody who could perhaps take part in making and unmaking governments. Particularly unmaking, I think.

KEN AULETTA: In 1972, Murdoch used his newspapers as a political weapon to help elect a new prime minister.

POLITICIAN: The man who is going to be the first Labour prime minister of Australia for 23 years, Dolph Whitlam!

MUNGO MacCALLUM: He'd supported Whitlam. He'd helped to destroy the previous government, therefore Whitlam should now support him and whatever demands he made, however outrageous they might be.

KEN AULETTA: Whitlam says that after the election, as a price for his support, Murdoch asked to be made Australia's ambassador to London, a charge Murdoch has always denied.

MUNGO MacCALLUM: You would have thought that he would have known that it was an absolutely impossible request that no prime minister on earth would have granted, but that was Rupert. I mean, no hide, no Christmas bonus. And Rupert certainly felt that there was a quid pro quo involved.

KEN AULETTA: Whether because Whitlam refused to grant him favors or because, as Murdoch says, he was ineffectual, in the 1975 election Murdoch turned his papers against Whitlam and supported the more conservative Malcolm Fraser.

MUNGO MacCALLUM: The journalists' copy was being altered. They were given specific instructions on what they could write and what they couldn't write. And where the instructions weren't specific, they learnt pretty bloody quickly because nothing appeared in the paper if it didn't follow the line. It was the most extraordinarily ruthless and one-sided political coverage I think any of us can remember and we devoutly hope we never see it again.

MAX SUICH: It was the first time he'd really unleashed a ferocious campaign against a politician in an unfair fashion. The manner in which it was done was undoubtedly in breach of journalistic ethics.

KEN AULETTA: The one-sided coverage sparked demonstrations. Murdoch's papers were burned in the streets. And then Murdoch's own journalists walked out. It was a rarity-- reporters striking not over money, but ethics.

But again Murdoch had backed the winner and now he wanted a favor from Prime Minister Fraser: a change in the laws regarding the ownership of T.V. stations. Murdoch's plans to expand into foreign markets conflicted with laws requiring station owners to maintain their permanent residence in Australia. Fraser had the law changed.

INTERVIEWER: There was a great row when you-- when you did change the law--

MALCOLM FRASER: [March, 1987] I didn't-- I didn't feel it as a--

INTERVIEWER: --suggesting that you were getting him off the hook and that you--

MALCOLM FRASER: Well--

INTERVIEWER: --you yourself had succumbed to pressure. I mean, is there nothing in that?

MALCOLM FRASER: I-- I-- no, there isn't because I didn't-- you know, I really did believe that the fact that he was a foreign resident, but an Australian, should not be held against him.

MUNGO MacCALLUM: I think Malcolm Fraser passed this legislation not so much out of gratitude for past favors from Rupert, but out of fear of what Rupert might do if he didn't get it because Malcolm Fraser had seen how viciously the Murdoch press could operate in trying to tear down governments in the past and he didn't want it to happen to him.

KEN AULETTA: Murdoch had won his wars in Australia. He was now ready for new continents to conquer.

GRAHAM KING: There was nobody about on Saturday morning except I bumped into Rupert wandering along the corridor and he said, "Hey, come here." So we went into the board room and he said, "I think we're going to buy a newspaper in England" and, of course, when he said The News of the World, I nearly fell on the floor. You're talking about the biggest-selling newspaper in the world-- it was then selling over six million copies a Sunday-- unassailable corporately, safe in the hands of a family. What was he talking about?

KEN AULETTA: Sir William Carr was the chairman and largest shareholder of The News of the World. His family had run the paper since 1891. But in 1969, the family was threatened by a corporate raider with a reptilian reputation.

GRAHAM KING: They'd had a bid in from Robert Maxwell, at the time, which they didn't like and didn't want and rejected. But the pressure was to find some kind of white knight to come and rescue The News of the World from the hands of the evil Robert Maxwell.

KEN AULETTA: Murdoch flew to London to meet at this restaurant with members of the Carr family. With the charm he can turn on and off like a light switch, he seduced them, telling the family, "I'll help you beat Robert Maxwell. We'll run the company together. Sir William can stay on as chairman. All I want is 40 percent of the stock and the job of managing director."

THOMAS KIERNAN: It came down to a battle between Maxwell and Murdoch at a special shareholders meeting to decide who-- which of the two would be the buyer. Murdoch's bankers and lawyers arranged for the shareholders meeting to be packed with friendly shareholders of the Carr family and all the shareholders were told in advance that the Carr family wanted Murdoch rather than Maxwell to win the battle.

KEN AULETTA: Although Maxwell was offering to pay a higher price, the vote went overwhelmingly for Murdoch. Robert Maxwell had been outflanked and perhaps for the last time the establishment would view Rupert Murdoch as a savior.

RUPERT MURDOCH: We will be the largest shareholder. Together with the Carr family, it would certainly be more than 50 percent.

INTERVIEWER: Was buying The News of the World your own idea or was it suggested from someone else?

RUPERT MURDOCH: Entirely my own idea.

INTERVIEWER: And what is your motive, to help the Carr family or to expand your newspaper chain?

RUPERT MURDOCH: To expand my newspaper chain.

KEN AULETTA: Six months after the merger, Murdoch reneged on his gentlemen's agreement with the Carrs. Despite a pledge not to seek majority control, he did. Murdoch says he had no choice. The Carrs were inept and he had to protect shareholders. The Carrs were outraged and called Murdoch a liar and the charge that his word was counterfeit would shadow him the rest of his career.

Once he had full control of The News of the World, he moved to boost circulation. The paper, already known as a scandal sheet, became even more salacious.

ALAN WATKINS, Newspaper Columnist: Its nickname in Fleet Street was News of the Screws. One of the standard stories was, "Vicar elopes with lady organist" and then you'd get this elopement of the vicar with his-- it seemed to be going on all the time, that there were sort of erring vicars and criminal Scout masters. And this --this-- this would be spelled out in great detail about what they'd got up to and people loved it.

PAUL JOHNSON: He really got the jackpot there because in Australia he hadn't been a major newspaper proprietor. He'd been quite big in television and so on, but he hadn't been really big. In Britain he got The News of the World and that is the biggest-selling newspaper in-- in Britain. And that was the real foundation of his international empire.

KEN AULETTA: But there was a problem. The News of the World was a Sunday paper and he needed a daily to keep the presses running all week long. When a money-losing daily, The Sun, came up for sale, Murdoch bought it.

GRAHAM KING: They sold it to Murdoch in the belief that it would wreck him, that it would lose him an awful lot of money. The best brains, the best newspaper brains in Fleet Street, had-- had not made a success of it. They couldn't see why an Australian who knew nothing about Fleet Street could make it a success.

KEN AULETTA: On November 17, 1969, the new Sun was readied for its debut. Murdoch's young wife, Anna, was given the honor of launching the first press run.

ANDREW NEIL: Rupert Murdoch took that paper, The Sun, and totally redesigned it, turning it into a fast, dynamic, aggressive, rude tabloid.

ANNOUNCER: [television commercial, 1986] Get ready for Britain's biggest bingo game! Forty thousand pounds every week!

GRAHAM KING: We used television a lot. Page by page, with goody after goody after goody. Giveaways, competitions, special features, supplements. You name it, we threw it at them. And, of course, you know, "I've been living without this amazing newspaper." The key to the success of The Sun was the realization that a newspaper isn't or need not be all about news.

ALAN WATKINS: He regarded journalism really as a branch of the entertainment business and he thought that people bought a paper not to be instructed or to be edified or to know about the world, but to have a good laugh.

ANDREW NEIL: It went from a paper selling less than a million, soared to selling more than four million. It became the biggest-selling tabloid newspaper in Britain, and, in the process, really, as a lot of people said, dragged tabloid standards down because as the other newspapers lost circulation, they began to follow some of the techniques that The Sun had used, including the famous page three topless girl.

KEN AULETTA: The so-called "Sun lovely" was the most controversial Murdoch addition to The Sun. Each day, the paper's page three included a photo of a topless model, along with a dash of prurient prose.

ALAN WATKINS: When a-- a friend of mine worked for The Sun, he actually cut out page three so that his mother wouldn't see it. And when she said, "Well, there's a page seems to be missing, Frank," he said, "It's the trade unions again, you know. They cut out pages."

GRAHAM KING: In our attempt to be continuously outrageous, we were always in hot water with the regulatory body. And we had "pussy week," for example, which caused them a lot of hand-wringing, but in the end, it genuinely was about cats, and so that had to be allowed. We used to run theme weeks in The Sun in those days and we devised "Bath Week."

ANNOUNCER: [television commercial, 1976] --even win a bath full of champagne just by stepping out in [unintelligible] in your fabulous five piece Sun this week!

ANDREW NEIL: As the '70s went on, Rupert Murdoch was moving more to the right politically. The man who had Lenin's bust in his room in Oxford was now becoming more and more Thatcherite and Reaganite. Rupert Murdoch admired Margaret Thatcher enormously. He thought she was the savior of the country. Here was this sort of lower middle class woman coming along, hand-bagging British institutions, shaking the country up, taking on the unions, berating management when it was useless, and he admired it a lot.

The Sun was crucial, really, to the Thatcherite revolution and to Mrs. Thatcher's political prospects. You see, the Tory Party, the right-wing party, never had a working-class newspaper support it before, never had a paper that was read by blue-collar workers-- indeed, 11 million working men and women reading this paper.

MICHAEL GRADE, Chief Executive, Channel 4, U.K.: The Sun, two elections ago, said, "It was The Sun wot won it." [sic]

MARGARET THATCHER: --a damn sight better than Labour!

MICHAEL GRADE: They were reflecting what politicians actually believe. They do believe that The Sun newspaper, because of the demographic readership of the paper, actually swings elections.

KEN AULETTA: By now, Murdoch was engaged in another tabloid adventure. He took the millions his London papers were generating and bet them on the new world.

ROBERT SPITZLER: Rupert wants to be king of the world. To be king of the world, you have to be king of New York because New York is the center of the world, isn't it, the center of the universe, the capital of the world? So what makes more sense than for him to come to New York, buy a newspaper, run a newspaper, make it an influential newspaper?

KEN AULETTA: In late 1976, Murdoch bought the liberal New York Post, the oldest continuously published daily in America.

JAMES BRADY: He had a lot of these ideas things that had worked in Sydney, Australia, and in Fleet Street. It only had 400,000 sales every day, at that time, and within two years, it was almost a million. And he just went wild with it and had a lot of fun and the headlines got brighter and the pictures got bigger and the girls got prettier.

THOMAS KIERNAN: Anna Murdoch, Rupert's wife, told me that she overheard him talking to his editors one day about starting the "page three girl," the nude page three girl, in the New York Post. And she said, in effect, "If you do that, Rupert, I will leave you because I will not have our children walking down on their way to school, walking past newsstands and looking at the New York Post with naked women on page three."

He's a complex personality because if you read the editorials of his newspapers, they're very highly moralistic and they're very highly principled, and so on. And yet they appear in papers that are almost without principles, journalistically.

KEN AULETTA: In 1977, I was working for New York magazine when Murdoch bought it, too. We all feared he would tart up our journalism, so more than 40 of us quit. But he didn't care. And as it turned out, we were wrong. He didn't change the magazine.

But some thought he did desecrate the Post. He made it more conservative and he replaced one quarter of the staff with tabloid warriors from his empire.

STEVE DUNLEAVY, Reporter, "New York Post": The New York Post had had, at that time, extreme declining circulation and we came in with a bang. As I say, maybe on my part I made that bang a little bit too loud. But at the same time, we got the job done. Nineteen seventy-seven was the great black-out and there followed 24 hours to almost 48 hours of terror.

THOMAS KIERNAN: They handled the black-out stories by exaggeration and by scare headlines over their stories and on their front pages. The impression was created that there was an impending threat of a kind of race war in New York.

KEN AULETTA: It was a wonderful summer to be a tabloid warrior.

JAMES BRADY: Son of Sam was just a godsend for the Post-- you know, a good serial killer. He was targeting people in lover's lane, primarily attractive young women of a certain physical description, and he was sending these wacky notes.

STEVE DUNLEAVY: It really changed the city, for while he was on the rampage, people would not sit in their cars. The purchase of locks and guns just rocketed in the city. The Son of Sam virtually gave New York City this massive nervous breakdown.

THOMAS KIERNAN: It was half truth, half speculation. That was Murdoch journalism.

KEN AULETTA: That summer, Murdoch found another favorite son to promote-- Ed Koch, running for mayor.

ED KOCH, Former Mayor: When the phone rang, the voice on the other end said something like, "Congressman Koch, please." I said, "Speaking." He said, "Congressman, this is Rupert," and I guess I was still a little sleepy maybe. I said to myself, "Rupert? Rupert? Rupert's not a Jewish name. Who could be calling me at 7:00 o'clock in the morning named Rupert?" And then suddenly, because he was speaking, I realized it was Rupert, the Australian. I mean, the voice came through. And I said, "Yes, Rupert?" He said, "Congressman, we're going to endorse you today on the front page of the New York Post and I hope it helps." I said, "Rupert, you've elected me."

KEN AULETTA: The Post did not just support Koch, it anointed him. Murdoch says he loves newspapers because they give him the power to help shape the public mind and, as always, he loves to win.

ROBERT SPITZLER: Rupert is a power junkie, in the sense that he enjoys the company of people with power. He also holds them in a certain degree of contempt. When the first Koch television advertisements appeared, Rupert coming into the office to inquire about them and asking, "Are those ads any good or do they show the real Ed Koch?" It was sort of funny.

When Rupert first came to New York, he was an Australian of no particular reputation. He bought the New York Post, suddenly he becomes an intimate, so to speak, with mayors, with governors and the president. You can't ignore a guy who runs a New York newspaper.

KEN AULETTA: Or with someone who owns the prestigious Times of London, for 200 years the paper of the establishment. For Murdoch, 1981 was a chance to buy his way inside the castle.

RUPERT MURDOCH: [February 12, 1981] I've operated and launched newspapers all over the world. This new undertaking I regard as the most exciting challenge of my life. Thank you.

ANDREW NEIL: Here was Rupert Murdoch's chance to get into the up-market end of the newspapers and still keep his down-market tabloids. Many people have thought there was some sleight of hand on this, that because he already owned the Sun and The News of the World, that the fact that he was now going to buy two other major national newspapers, even though they were in different markets, should have been referred to the Monopolies Commission. But he had the right political connections and he got it through.

MICHAEL GRADE: He put all of his newspapers behind Mrs. Thatcher and the extraordinary and exponential rise in Rupert Murdoch's media holdings in the U.K. happened to coincide with that period. And he dodged his way around a lot of legislation and regulation and the government either turned a blind eye or helped him.

ANDREW NEIL: But he did have to give some commitments that he would not be hands-on, be an interfering proprietor in the editorial content of the paper the way he was with the tabloids, and these commitments are enshrined in articles of association in Parliament.

RUPERT MURDOCH: There will be no fundamental change in the characteristics. I am not seeking to acquire these papers in order to change them into something entirely different.

RANALD MACDONALD: I was with Harry Evans. Harry Evans was editor of The Sunday Times. The telephone went. It was Rupert Murdoch. He said that he was going to give him the ultimate challenge, to make The Times the world's greatest newspaper, and Harry was the one to do it. And not only that, he would have total freedom. By the end of the call, Harry comes back to the table and says, "I'm going to do it. It's terrific. It's exciting. He believes in me." I took a bet on that he wouldn't have a job in a year and I won by a day.

HARRY EVANS, Former Editor, "Times of London": The differences between me and Mr. Murdoch should not be prolonged. I am therefore resigning tonight as the editor of The Times. He's a good businessman and a lousy journalist, a lousy journalist in the sense he doesn't believe in public interest journalism and he doesn't keep his promises. He's a liar. He's incontinent in breach of promise and also he's a very treacherous person, it has to be said.

KEN AULETTA: Despite his pledges, Murdoch was now in charge.

RUPERT MURDOCH: [Sunday Times editorial meeting 1984] I don't like this at all. What's the point of this section?

EDITOR: Well, they're-- they're previews of new people, new things, new cars.

RUPERT MURDOCH: Why? Why?

EDITOR: Well, because they're new.

RUPERT MURDOCH: We have the whole section of black and white called "Innovations." And I'm going to have a real argument with you on these-- about this if you don't listen to me, do what I want then, you know, it's going to be your fault, not my fault if it doesn't work.

EDITOR: Sure.

KEN AULETTA: But for the greatest journalistic fiasco in the history of The Times, Murdoch had no one but himself to blame.

MURDOCH: Oh No!

HARRY PITTS: He opened the door, great grin on his face. He said, "I've just pulled off the biggest coup in the whole of journalism." I said-- he said, "I'm not allowed to tell you till tomorrow, but I'll tell you." He said, "I've just bought Hitler's diaries."

KEN AULETTA: Murdoch had 60 volumes of the diaries, authenticated by noted historian Hugh Trevor-Roper.

ALAN WATKINS: A lot of people emerge from the story with egg on their face. It struck me as a case as a combination of gullibility and greed, really, on all sides.

KEN AULETTA: The diaries Murdoch and others had bought were fakes and, at the last moment, his own historian got cold feet.

ALAN WATKINS: Murdoch was told by one of his editors, "Trevor-Roper has got doubts," to which Murdoch replied, expletive "Trevor-Roper. Go on and publish."

HARRY PITTS: It turned out not quite as he expected, but as he said afterwards, he didn't lose anything on it. He doubled the circulation of The Sunday Times and then he said that really should stay. He said the fact that the diaries didn't go on didn't matter and, "Of course, I didn't have to pay for the diaries because they were a fraud."

KEN AULETTA: When the turmoil subsided, the truth was Murdoch had saved The Times. Today it remains respectable.

Murdoch could afford to subsidize The Times since his other British papers were extremely profitable. But he had a big problem. His printing presses belonged in a museum. Murdoch wanted to modernize. The unions did not.

ANDREW NEIL: The unions had stopped any new technology coming into Fleet Street. They demanded massive salaries and they controlled the papers. And nobody thought they could be broken. Every Saturday night, we never knew if The Sunday Times was coming out or not. They used to complain about smells in the foundry and you waved these smells away not with air conditioning, but with five-pound notes. We employed 300 people to print the paper. We only needed 80. We now employed Donald Duck. Ronald Reagan worked for me. They were all fictitious names that we had to pay people. It was anarchy.

KEN AULETTA: Murdoch wanted to move his papers from Fleet Street to a modern plant in the old London docklands at a place called Wapping. For six years he urged the unions to move to this automated plant. For six years the unions resisted, fearing they would lose jobs.

BILL O'NEILL: We were told that we would never print newspapers out of this plant, that the best thing that we could do was to burn it down and collect the insurance.

KEN AULETTA: Bill O'Neill was Murdoch's man when it came to labor disputes. A former union official, he'd muscled aside troubles in Australia and America before moving to Wapping.

BILL O'NEILL: I was described as Rupert Murdoch's international trouble maker as opposed to trouble shooter. One of the union leaders said that I was trying to introduce the work practices of an alien continent and I said, "Yes. It's the real world.'

ALF PARISH, Print Union Leader: We, for example, offered to agree to the installation of a new composing system that within a period of two years would enable the journalists to operate that system instead of compositors. But subsequently we were told, no, the company couldn't afford the new system. It had been put on hold. Now we know, with the value of hindsight, the reason they didn't have the money was because they'd actually bought the system.

KEN AULETTA: Nine miles further down the Thames, unbeknownst to the unions, Rupert Murdoch was hatching an audacious plot. Here, in a dilapidated warehouse, a team of American computer specialists was carrying out a top-secret operation.

BEN SMYLIE, Head of Computer Team: It was an awful-looking place from the outside. It used to be a paper warehouse. It had holes in the walls of this steel building. We couldn't really plug anything up because from the outside it had to look like it was still, you know, an old, defunct paper warehouse.

KEN AULETTA: The computer terminals arriving at the warehouse would become the brains of the printing presses at Wapping.

BEN SMYLIE: We had to proceed absolutely in secret. Mr Murdoch's orders were that we were to proceed absolutely in secrecy because if it was exposed and the union found out about it, he would lose an enormous amount of leverage. He wanted them not to know that he was capable of producing this paper without them.

KEN AULETTA: If the system worked -- and if it could be moved to Wapping -- Murdoch would have the upper hand.

BEN SMYLIE: All the equipment had to be moved to Wapping in the middle of the night for security reasons. Cartons had been spray-painted with brown paint on the outside, so that no company of origin could be determined, and loaded in these big lorries and taken to Wapping to the plant.

KEN AULETTA: The operation succeeded brilliantly. It was the end of the road for the unions.

REPORTER: [February, 1987] All these talks seem to have come literally to the end of the road, don't they.

RUPERT MURDOCH: I'm afraid so. Everything has to come to an end some time and we've been waiting six years to get somewhere and we just can't leave the clock standing still anymore.

BRENDA DEAN, Print Union Negotiator: I rather got the feeling the company didn't want a settlement this morning. I hope that feeling isn't a correct reflection of his true position, but certainly it's very bleak at the moment.

KEN AULETTA: With negotiations at a standstill, Murdoch ordered the presses to roll at Wapping. When the unions struck, he fired them and bused in strike-breakers.

BEN SMYLIE: A number of people were brought from various Murdoch properties around the world. There were staff brought from New York, from Australia.

STRIKER: We won't stand people like him. We don't like people like him. He's too powerful. He's got too much money. And we are people with principles. We've got wives and children. And people like him spit on people like us.

KEN AULETTA: Murdoch was both exhilarated by this new war and fearful of the dangers that lay ahead.

BEN SMYLIE: It was a terrifying, Orwellian place-- you know, rows of concertina wire and barbed wire and spikes and hundreds of police on horseback and day and night, with 10,000 screaming picketers outside hurling stones and shooting golf balls from two-man slingshots.

ANDREW NEIL: We knew that if we lost, that if the unions won, if they got over the barbed wire and in and took over, we were finished.

KEN AULETTA: Murdoch was not alone in his fight. His battle coincided with Margaret Thatcher's campaign to curb union power. She would use the full weight of police and state powers to defend her old ally.

ALF PARISH: We were confronted by the police and a police force that we know had tremendous reserves. It was really like a military operation rather than a police operation.

PAUL JOHNSON: The printing unions threw everything into that battle, but they were beaten. Rupert Murdoch was able to win and it was a massive and unconditional victory.

ANDREW NEIL: What happened with winning the battle of Wapping was that every extra penny you made went straight to the bottom line. There was no union there, holding out its can, saying "No. Sorry, guv. That's our money." We became highly profitable.

And he suddenly realized that here was, in a way, this pot of gold lying on the banks of the Thames in this old Docklands place that would give him the financial clout to move into the biggest market in the world, take on the biggest media companies in the world, in the United States, and become an American media mogul.

KEN AULETTA: Murdoch saw himself as more than a press lord. In 1985, he acquired a Hollywood studio. Its production facilities and film library would become the factory for his entertainment empire.

BARRY DILLER, Former Chairman, 20th Century Fox: I think Rupert is an absolute value-neutral, so to speak, opportunist, in the best sense of the word. Where he sees opportunity, unlike most people -- who equivocate, who do this, protect themselves or whatever -- Rupert Murdoch just says, "Yes, there's opportunity. I'm going after it."

KEN AULETTA: Murdoch and Diller needed a television distribution system for their studio. Metromedia's seven large T.V. stations could be a perfect base for a fourth network. Diller looked at the numbers.

BARRY DILLER: I said to Rupert, "They'll go for a ridiculous amount of money, but it's the only way to do a network."

KEN AULETTA: But Metromedia was asking $2 billion.

BARRY DILLER: I called Murdoch and said, "Look, the only way to deal with this is to say yes." And he said, "Well, great." I said, "What do you mean?" He said, "Well, if you have to say yes, I say yes." I said, "You what?" And he said, "Yes." And I figured we just somehow-- we'd all be, like, drowned in the East River or we 'd sort it out.

KEN AULETTA: It was, at the time, one of the biggest media deals ever, but first it would have to clear some regulatory hurdles in Washington. Because democrats and Republicans alike had pushed for a new network, Murdoch and Diller knew the FCC would be sympathetic .

TOM SHALES: Fox was given every break throughout the '80s on the grounds that a new network should be encouraged. The FCC decided that we needed more networks, therefore, a lot of hurdles that Fox should have had to jump over were just sort of quietly laid down and Murdoch was allowed to just stride right on through.

ANNOUNCER: [October 9, 1986] Live from Fox Television Center in Hollywood, it's the Late Show starring Joan Rivers!

KEN AULETTA: Fox Television got off to a rocky start.

JOAN RIVERS: We are proud, proud, proud, proud to welcome--

KEN AULETTA: The advertisers were not happy. Show after show bit the dust.

BARRY DILLER: I'd say we had a real rough two and a half years. I remember it was in the summer I said, "You know, January, we're toast. I mean, we-- we they-- they're all going to-- all of our affiliates are just going to walk and once you get any little dominoes going, the rest is whatever." And also News Corps was on the verge of pulling the financing.

ANNOUNCER: [television commercial] One word describes the new season of 90210 -- hot!

KEN AULETTA: Eventually, new, sexier shows found a younger audience and revived the network.

GARTH ANCIER, Former President, Fox Entertainment: Everyone else was playing it a lot safer, appealing to kids with somewhat sanitized programming, and advertisers said, you know, "Gee that's the-- those are the audience-- the audiences that I want to reach because those are the people who haven't decided yet what brands they want to use for the rest of their lives." They're still trying Gleam versus, you know, Colgate.

TOM SHALES: The irony now is that congress is Complaining about violence and smuttiness on T.V. and Rupert Murdoch has been in the vanguard of that-- at least, his Fox network has. I mean, it has established sort of new lows in taste on television.

PRESTON PADDEN, President, Fox Network Distribution: People like watching the Fox network. We have brought creativity, imagination and, I would argue, quality to television programming that hadn't been there when the three old networks had the business to themselves. And I don't think you need to defend a product that finds widespread commercial acceptance in the marketplace.

TOM SHALES: This argument of, "I'm giving the people what they want" -- I mean, I think that's probably what Nero said when he fed christians to the lions. As far as I know, the ratings on that were very high. It was a big crowd pleaser. You know, a terrible accident on the highway causes everyone to slow down and stare at it. That doesn't mean you necessarily would want to put it on prime time.

KEN AULETTA: Fox also struck gold with their "reality-based" programming. They were the first to produce a tabloid magazine show.

Murdoch's tabloid warrior, Steve Dunleavy, was brought over from the Post to help launch A Current Affair.

STEVE DUNLEAVY: We didn't necessarily design it with some superior television knowledge. We certainly thought we could transfer our skills of print, whatever skills that may be, into television. And we had very modest goals. But, my God, it took off and made-- made fortunes.

WOMAN: I knew I was going to die!

WOMAN: I knew I was going to die!

ANCHOR: Here's a killer's account of a night that ended in bloodshed.

TOM SHALES: It's all news that doesn't matter, and yet it's given such importance that viewers are led to think it does matter somehow. Its mere existence cheapens the whole area of broadcast journalism.

BARRY DILLER: It started really descending into sexual exposes and sticking people's cameras in-- I mean, it started to really push over that-- that murky tabloid line.

STEVE DUNLEAVY: People who have criticized A Current Affair haven't watched it, believe me, because it's got a tremendous, tremendous amount of heart. It really has. I mean to say, some stories will make you-- will make you cry. Some stories will make you laugh. Some st