It had been a hard week and the 73-year-old chairman was showing signs of strain. Rattling through a good set of results for BSkyB on Friday, Rupert Murdoch dispatched a few questions about football and a controversial share deal before wrapping up proceedings in 40 minutes flat. To the astonishment of the assembled reporters, the usually ebullient media mogul then rushed off without so much as a cutting remark. Most had expected fireworks from the man whose empire spans Europe's largest pay-television station, the Sun newspaper and Fox television. They were left with a damp squib.
His lackluster performance raised more questions than it answered. Was he ill? Or just showing his age? With his hair much whiter, his delivery was less snappy than of old. Or was he simply exhausted from a week in which he had taken on a fellow media mogul and seen the issue of his own mortality come once again to the top of the agenda?
The spat that blew up last week between Rupert Murdoch and John Malone, the billionaire cable advisor, took everyone by surprise, including, it seems, the boss of News Corp. himself. Friends of both men in New York said Murdoch was "enraged" at Malone's plan to almost double his stake in the family firm to 17 percent. Murdoch's response -- he called an emergency board meeting and announced a "poison pill" takeover defense to prevent Malone from buying any more shares -- was described as "visceral" and an "overreaction" by one.
The two men are close, or as close as two cutthroat billionaire businessmen can be. Ken Auletta, the veteran media commentator for the New Yorker, describes the two as "kindred spirits" who talk regularly and share a political conservatism. "They admire each other," he says. "They talk like chess players in a world which plays checkers. They like to be three moves ahead of everyone else."
Their deals and negotiations over the past 15 years have ranged from a mooted bid for CNN in 1995 to the acquisition of U.S. satellite group DirecTV. Auletta believes that Murdoch's response was a combination of disappointment "that this man he thought was his friend could act so independently without even consulting him" and anger at himself.
In planning to buy more News Corp. shares, Malone was taking advantage of the company's move from Australia to the U.S. as well as its complex dual-voting structure. The move, which he described as "opportunistic and strategic," relied on the fluctuating prices of nonvoting and voting shares ahead of the company's official listing in America. Theoretically, using his huge number of nonvoting shares, he could have bought 49 percent of News Corp.
Although extremely unlikely, the very thought suddenly made Murdoch, with his 13 percent equity stake and 30 percent vote, seem very vulnerable. Murdoch, ever the predator, realized that he had left his own company open to a takeover because of his desire to gain access to U.S. investment money.
Auletta says Murdoch is "embarrassed" and "furious" at himself as much as anyone. A series of phone calls between Murdoch and Malone during the past week apparently involved some increasingly cordial mood music.
In a call with analysts on Friday, Malone, dubbed Darth Vader during the sale of cable company TCI, could not have spoken more highly of the News Corp. boss. "We have an enormous admiration for Rupert and the job he has done," he said. "Our intentions were and remain very supportive and very friendly towards the Murdoch family." In the call, Malone blamed securities laws for his inability to warn his friend of his share purchase. This lack of advance warning seems to have infuriated Murdoch. In January, when Malone first bought voting shares in News Corp., the chairman said: "He [Malone] is very welcome. He called yesterday and told me about it." Admittedly, he had been convinced that the purchase was a short-term investment only.
So what is going on? Michael Wolff, media writer for Vanity Fair, said the fight had all the hallmarks of an endgame. "You wait and wait and wait and then one day you get up and it's happening -- a denouement has begun. I think this is the beginning of the denouement."
For most observers, talk of a denouement at News Corp. means only one thing. What will happen once the 73-year-old patriarch dies? He has long made it clear that he wants to hand control of the business over to his children. His two sons, Lachlan, 33, and James, 31, hold senior executive positions at News Corp. and Sky. Several analysts suggested that the sprightly 64-year-old Malone wants to leverage his increased stake into a boardroom role following Murdoch's departure. As a competitor in some markets, he has not managed to find his way onto the News Corp. board in spite of his shareholding.
Several people close to Malone, who runs Liberty from his ranch in Denver, Colo., for most of the year, deny that that is his intention. Auletta says: "His life has been about shedding things so he can spend more time in Maine."
After selling TCI to AT&T for a top-of-the-market price of $46 billion in 1999, Malone has spent large chunks of the summer at his East Coast vacation home. Since that deal, the share price of Liberty Media, his investment company, has languished. The holder of a doctorate in mathematical modeling has occasionally blamed investors for failing to understand his complex empire, with investments in channels such as QVC and Discovery as well as telecommunications groups.
A rival version of the endgame scenario sees Malone using his increased leverage in News Corp. to force an asset swap with the media group. Henry Ellenbogen, an analyst with T. Rowe Price, believes Liberty has put itself "in a very favorable negotiating position" through its aggressive behavior.
Malone hinted at as much Sunday when he said there had been discussions between the two sides over various assets. "We have had many partnerships over the years [with News Corp.] and hopefully we can continue to help each other."
Some analysts think Liberty is putting pressure on News Corp. to buy a group of its assets, including the News Corp. stake itself. Although few analysts have been able to work out exactly how this would be done, it would not be beyond the abilities of these two veteran dealmakers to work out an arrangement whereby Malone realizes some more value from his underperforming assets while Murdoch gets back some voting shares. One possibility is News Corp. giving a channel such as Discovery greater access to its satellite platform in return for its own shares.
Interestingly enough, the spat coincided with a row at BSkyB over News Corp. benefiting from a buyback that gave it an additional 2 percent of the company without spending any more money. Murdoch's own aggressive use of U.S. law to block a rival predator prompted a few bitter comments from U.K. investors last week, annoyed at his control with a minority stake. The buyback itself, which was passed on Friday, was opposed by almost a fifth of those voting. One investor, who refused to be named, said the mogul's past behavior had lost him support. "If it's Murdoch, it must be Machiavellian." After such a week, which raised questions of his own mortality, it is perhaps little wonder that Murdoch himself refused to comment.