Taking the Wheel at Fox : Murdoch Moves Swiftly to Take Charge After Replacing Diller

At 6:30 a.m., a green Mercedes Benz 500SL pulls up to the executive building on the 20th Century Fox lot. Inside is News Corp. Chairman Rupert Murdoch, who recently put himself in the driver’s seat at Fox.

Murdoch strides into his rambling white office, removes the double-breasted jacket of his British-cut suit and settles into an overstuffed sofa, where he spends the next three hours on the phone to his London office, scribbling notes on his ubiquitous legal pad.

The rest of his day is devoted to matters closer to home. There’s the challenge of turning Fox into a national news network. There’s the effort to better integrate the entertainment company into his international operations. There’s the thorny issue of negotiating management contracts. Murdoch, 61, has even offered tips for toning down the racy program, “Studs,” after firing its creator, Stephen Chao, in a highly publicized move earlier this year.

The reason for all this activity, which began when Murdoch replaced former Fox Chairman Barry Diller as the day-to-day manager six months ago, is simple: Fox’s film and TV operations are now the fastest-growing part of News Corp., the nearly $8-billion global colossus Murdoch built over the last 40 years from two small newspapers in the provincial Australian city of Adelaide.

Murdoch sees Fox as the keystone in News Corp.’s long-term strategy of shifting its focus from newspaper publishing--its holdings include TV Guide and Mirabella magazines in the United States, The Times of London and The Sun tabloid, book publisher HarperCollins and 64% of the Australian newspaper market--to the electronic media.

He hopes to build Fox’s news operations into a force that will rival CNN as a worldwide supplier of news within a decade. Murdoch also plans to swiftly expand Fox’s prime time programming to seven nights a week.

“As Murdoch looked around, he realized that the United States was the key to his empire, and Hollywood was the key to the United States,” says Martin Pompadur, president of the media firm RP Cos. and a longtime Murdoch adviser.

Fox executives first realized that change was afoot last summer, when Murdoch ordered his unmarked office on the first floor of Fox’s aging executive building redecorated and enlarged.

Until then Murdoch, was infrequently spotted on the Century City lot, even though since 1985, he had owned the studio that produced “Home Alone.” The media tycoon would typically swoop in for a few days, hold a round of meetings, attend a cocktail party or two, then jet off again.

Murdoch’s fleeting presence was due to Diller, the mercurial boss who had poured most of his tireless energy into launching Fox’s fourth network. Diller, an imperious micro-manager, ran the studio like a fiefdom.

But Murdoch, after spending two-years refinancing News Corp.’s $7.6-billion debt, which brought the media conglomerate perilously close to the brink, was bored. While he still faced a $2.5-billion ballon payment in 1994, Murdoch had sold the brash New York Post tabloid, emerged victorious from the costly British satellite TV war, and modernized his London and Australian newspapers. There was nothing left to do.

It was time to go to work at Fox.

“I think it suited me to do this and Barry to move on,” Murdoch said in a lengthy interview in his office. . “Barry doesn’t do anything forever.” Both described the parting as friendly. They first talked about Diller’s exit last summer, nearly eight months before his resignation was announced. Diller told Murdoch that he “wanted to run his own show.”

The two men, although never close socially, stay in touch. Murdoch sent Diller tapes to all the new Fox pilots, and Diller every few weeks shows up for lunch with Murdoch at the Fox commissary, where they dine in a private suite, attended by vested waiters.

Murdoch says he had been preparing for the move to Los Angeles since he bought the old Jules Stein estate in Beverly Hills six years ago--complete with $2 million worth of art and antiques. He lives there with his wife, novelist Anna Murdoch, and their daughter, Elizabeth, who works at Fox’s KTTV-TV/Ch. 11.

Although Murdoch usually skips glitzy premiere parties (“I can’t go to work for 12 hours a day and then go to parties. I’m too old for that.”) he dines regularly with industry heavyweights such as super-agent Michael Ovitz of Creative Artists Agency, and with Anna hosts small dinners at their home.

Murdoch also regularly attends meetings organized by Motion Picture Assn. of America President Jack Valenti, along with fellow executives such as Warner Bros. Chairman Robert Daly, MCA Inc. Chairman Lew Wasserman and Walt Disney Studios Chairman Jeffrey Katzenberg, at the Beverly Hills Hotel.

“He’s behaving like someone who wants to be a good citizen,” observes one agent who has met with him several times. “Rupert used to only come into town for a day or two and then be off to London or wherever. He lived on an airplane. He doesn’t live on an airplane anymore.”

Now, with Murdoch decamped in Diller’s old office, he is drafting a major thrust into global television.

News Corp. recently purchased a 25% stake in a private Spanish TV network, which he sees as his toehold into the booming Latin American TV market. In another move, it acquired an 80% stake in a pay-per-view venture with Denver-based cable giant Tele-Communications Inc. Music also figures into the scenario: Murdoch has quietly begun recruiting executives for a new record label, to be called Fox Records.

Little escapes his attention, no matter how mundane.

When Murdoch invited writers from the TV show “The Simpsons” for a get-acquainted lunch at Trips in Century City, he surprised them with his detailed knowledge of all the new pilots. Before Diller even left, Fox executives got word that Murdoch was to be informed of all major decisions in writing. And he didn’t hesitate to call Fox managers directly, bypassing Diller, inquiring about the status on a film or TV project.

“While the split was amicable by Hollywood standards, it was clear the company was not big enough for both of them,” says a senior Fox executive who was close to both. Observed a division head: “When Rupert moved to the coast, he was very frustrated. There he was, in Los Angeles, he owned the company and couldn’t really do anything. He was sitting there for three to four months, and you could see it was eating away at him.”

One of the biggest differences Fox executives see under Murdoch is faster decision-making. One recalls asking for $40 million to upgrade satellite equipment. Murdoch signed off instantly.

“With Barry, the first response was always a ‘no’ and you had to work your way off that,” the executive says, lingering frustration still clear in his voice.

Murdoch allows that he had differences with Diller, but none serious. “Barry had a style of management which was admired by many. I will be the first to admit it had great benefits--up to a point. But it did lead to territoriality.”

Diller believed that each of Fox’s major divisions--film, TV programs, the Fox network and TV stations--should run independently. Murdoch wants the divisions to work more cooperatively, sharing ideas rather than clashing as they often did in the past.

Indeed, the last six months have been a tumultuous period at Fox, marked by resignations and firings, the most notable being the highly publicized escapade involving Chao, a Murdoch protege who was to lead Fox’s efforts to build a national news service before he hired a male model to disrobe in front of dignitaries at a company meeting in Snowmass Village, Colo.

Chao was replaced by Van Gordon Sauter, a veteran CBS News executive who had been out of day-to-day news management for nearly five years. Sauter is married to California State Treasurer Kathleen Brown. The couple have been personal friends with the Murdochs for more than a decade, first meeting through their sons who attended prep school together.

Murdoch also put Chase Carey, a handlebar-moustached rugby player and finance expert, in charge of Fox’s seven company-owned TV stations, a job left vacant by Chao’s firing. Another top aide is George Vradenberg, Fox’s senior counsel and a top strategist.

At Twentieth Television, the TV production and syndication arm, four department heads were moved out by Lucie Salhaney, the new division head recruited by Diller just before he left. Salhaney, along with Fox program chief Peter Chernin, are believed set for larger roles inside the company.

Contrary to some published reports, however, Murdoch was not heavily involved in Fox’s two biggest talent coups of the last six months--signing Chevy Chase for a new late-night Fox talk show, and recruiting director James Cameron to a five-year, 12-picture deal. Negotiating those deals was mostly left to Salhaney, film division president Joe Roth and business affairs chief Strauss Zelnick.

When it comes to film, Murdoch has been learning the ropes, and he concedes knowing less about that business than television. That will likely change.

“Barry was the ultimate insider,” says Roth. “He had been doing some form of the movie business for 25 years. Rupert, on the movie side, is an outsider. He is a fast learner. . . . I’m sure he will get to that point.”

Roth, whose contract expired last week, has been asked by Murdoch to stay on through the end of the year while they try to work out a new deal. The film division has had a spotty record since its 1991 box office hit “Home Alone,” which grossed $285 million.

Although Murdoch does not attend creative meetings, Roth says Murdoch has offered input on financial and marketing matters. Of the 20 films Fox has scheduled for release in 1993, only one has a budget above $30 million, “although that has less to do with Rupert than the pain the larger-budget films caused me over the last three years,” notes Roth.

Still, Murdoch does have strong points of view about entertainment in Hollywood.

The media entrepreneur who publishes pictures of bare-breasted women on page three of his British tabloids says he is deeply troubled by movies like TriStar’s “Basic Instinct,” which he told one associate was “borderline pornography that could lead to censorship,” and Warner Bros.’ “JFK,” as well as rap artist Ice-T’s controversial song “Cop Killer.”

“I don’t mind if Oliver Stone wants to make ‘JFK.’ That’s his business!,” exclaims Murdoch, his Australian drawl rising to make the point. “That’s Warner Bros. business! I wouldn’t make it here. It’s like Ice T. I wouldn’t release it ... one is fundamentally flawed and dishonest, and I don’t like songs telling people to kill people.”

Murdoch’s intensely craggy features tighten into a brief smile. His hairline is grayer and thinner than a couple years earlier--stress marks from the harrowing refinancing that brought Murdoch dangerously close to losing his company. He walks with a slight limp, the result of surgery a few days earlier on a knee he damaged in a skiing accident three years ago.

In television, Murdoch’s tastes are clearly conservative. He championed the tabloid show, “A Current Affair,” but found “Studs” not to his liking. Although the series costs a paltry $65,000 a week to produce and earns millions in profits, Murdoch says that too many episodes were “sleazy celebrations of promiscuity. . . . I told them to clean up their act or get off the air.”

Although Murdoch says he doesn’t agree with Vice President Dan Quayle’s statement that “Murphy Brown” is a poor role model for single mothers, he does believe there are “elites in Hollywood who have agendas that are not the agendas of the whole country. . . . I think (Quayle) speaks for a large number of people when he says that, but we don’t need some politically correct thinker in Hollywood or a Dan Quayle to tell us what we should or shouldn’t do.”

With its warm climate and relative lack of prescribed rules, Los Angeles reminds Murdoch of the Melbourne suburbs where he grew up, the son of a prominent Australian newspaper publisher. The class dictums and snobbery that he found so offensive in London and to a lesser extent in New York, are less prevalent in Los Angeles.

“I like the people here,” he says. “You hear all these things about how laid back it is here. Sure, there are plenty of dropouts and layabouts in Hollywood, but the people who are achieving things here--the actors, directors, set makers--are very hard-working professionals.”

Privately, however, Murdoch is less gracious about Hollywood’s upper crust who run the studios, TV networks and so-called “creative community.”

During the Los Angeles riots, while a gunman allegedly took potshots at the Fox gate house on Pico Blvd. and other studios sent employees home, Murdoch coolly lunched in the commissary with TV agents. He stayed until 8 p.m., scornfully confiding to one associate that the industry shut down early so that “the studio heads could escape to their Palm Springs homes.” At 5 the next morning, Murdoch showed up at Fox’s KTTV-TV studios with coffee and bagels for the news crews.

The salaries filmmakers earn are also said to appall Murdoch, whose first compliment about a manager usually concerns his or her ability to pare costs to the bone. Yet, Roth points out, “he grumbles about it but realizes it’s difficult to control. . . . Robin Williams does not come cheap.” Williams stars in the upcoming Fox film, “Toys.”

Although news interested Diller, it is a priority with Murdoch, who adheres to the old broadcasting maxim that the top news station will also become the top-rated station in the market.

That thinking sometimes makes Fox executives nervous. He considered replacing Fox’s successful afternoon cartoon shows, which the company produces, to make way for an expanded local newscast. He chastised former Fox TV Station division President Greg Nathanson once for programming a block of “I Love Lucy” reruns, telling him “I don’t want to be the Lucy station. I want to be the news station.”

Murdoch’s plans to challenge CNN stem from his regret for not buying CNN when it was on the financial ropes in the mid-1980s. “He thinks it’s his biggest mistake,” says one Fox executive. Says Murdoch: “We had a handshake deal, but Ted Turner changed his mind.”

Building local news operations at Fox stations in major cities is important because they are intended to serve as the local bureaus that will eventually feed the national news. Murdoch envisions more than 100 mini-bureaus for Fox News around the country.

In the United States, Fox does not plan to produce a domestic network newscast of the kind anchored by Dan Rather or Peter Jennings. Instead, it will package news stories gathered by its stations and feed them back to affiliates which can then edit them into their local newscasts. The stations will also help develop magazine shows and documentaries.

The obstacles may be more political than economic. In Britain, where Murdoch has outraged the already sensitive establishment and Labor Party by serializing a scathing book on the marriage of Prince Charles and Princess Diana in The Sunday Times, is talking again about curbing his media interests. The ITV, Britain’s independent commercial TV network, is trying to persuade the government that Murdoch should be forced to sell his 50% stake in BSkyB, the satellite TV venture.

Such an outcome would hobble Murdoch’s chances at creating a truly global TV network. The BBC has already taken steps in that direction.

So far, only 34 of Fox’s 140 affiliates have local news and many would prefer running higher-rated entertainment shows.

Yet, Fox executives are hopeful that more affiliates will see the benefit in starting their own local news operations. Already, 15 affiliates have added a local newscast over the last year and more than half are expected to have one on the air by next summer.

Taking long shots is nothing new for Murdoch, although challenging CNN may be the longest one yet.

“Murdoch is a complete optimist,” explains Nathanson, now general manager of KTLA-TV/Ch. 5 after resigning from Fox. “His belief is anything can be done, so just do it. He doesn’t understand failure.”