News Corp. (Nasdaq: NWS)
investors are understandably concerned the Department of Justice will
investigate rumored phone hacking of 9-11 victims here in the United
States. And rightly so. Such journalistic misbehavior could reflect
badly on the character of the corporation as a whole.
Even worse, it could lead in unexpected directions, opening other
cases of illegal/unethical behavior in the Murdoch Empire... perhaps
even threatening the sanctity of the Fox network and, ultimately, Fox
Any day now, the federal hound dogs are liable to stumble on a case
dealing with the very foundation of the Murdoch broadcast and cable
networks. If this were Law & Order: Corporate Misdemeanor & Other Crimes Unit,
it might be called "The Great License Heist of 1985." Its smell still
lingers in the nostrils of those who follow the FCC's role in guarding
the public's airwaves, as required by law.
By 1985, Sir Rupert already owned newspapers in America, including
three in San Antonio (the Express, the News, and a Sunday paper produced
jointly by both newspapers). The News gained worldwide notoriety in
1976 for warning killer bees were moving north from South America. The bees never did arrive.
The New York Post did its best in the 1970s and 1980s to match the social responsibility of the late News of the World with classic headlines,
including "Headless Body in Topless Bar" and "Teen Gulps Gas,
Explodes." Pete Hamill, a former editor of the Post, likened the paper
under Murdoch's leadership to "an unwanted guest who throws up at your dinner party."
Coming to America just wasn't as breezy as Sir Rupert envisioned.
Despite his growing media holdings, no one seemed to view him as
seriously as they did in the UK and Australia, places where Murdoch made
and broke governments. To make it in the US, he needed a TV network.
But first, he realized, he needed some TV stations to build that
So flash backward to 1985, the year his friend and fellow billionaire John Kluge had six TV stations to sell: his Metromedia Group,
an archipelago of independent stations in Chicago, Los Angeles,
Washington, Dallas, Houston, and the crown jewel in New York City,
Channel Five (then WNEW-TV). Sir Rupert bought the whole shebang for
more than $2 billion of largely News Corp. money.
There were two problems with the deal.
- The Communications Act of 1934, Title III Section 310 (a) 1-5, specifically prohibited granting TV licenses to foreign entities. At the time, News Corp. was a foreign entity.
- The law severely limits a foreigner's ability to own broadcast properties. At the time, Murdoch was an alien.
This is understandable. We wouldn't have wanted, say, the Germans
owning NBC and its news division during World War II. Or Al Qaeda and
its hidden finance arms owning, say, CBS News during the war on
But none of these safeguards stopped the FCC, which the law entrusts
with the job of protecting the public airwaves. Not only did the FCC
turned a blind eye to the violation of the most sacred communications
law. It turned its whole body from the apparent irregularities.
If the FCC had done due diligence and vetoed the purchase, it would
have had far-reaching consequences. For starters, there would have been
no Fox TV network. Buying stations one at a time across the country
would have taken years, and that's not the way Sir Rupert likes to
Even more significantly, there would have been no Fox News, a spinoff
that directly resulted from Murdoch's nine years of frustrated efforts
to launch a Fox network news division. He was consistently unsuccessful,
despite hiring numerous ex-presidents of CBS News as they jumped or
were pushed from power in the early 1990s.
If the FCC had done its duty in adjudicating the law, there wouldn't be a Fox News, which became, as Richard Reeves, senior lecturer at the Annenberg School for Communication and Journalism at the University of Southern California, puts it, "an arm of the Republican Party" that then set about "making the party into an arm of Fox News."
If the FCC hadn't given its stamp of approval and certified his "good character," as its licensing rules require, Murdoch would have been just another foreign interloper trying to stick his nose in our tent, like Robert Maxwell and Conrad Black.
How Sir Rupert got away with all this is a continuing source of astonishment, which I will get into in a future post.