Playing by His Own Rules

Around here, they still remember the good old days of Australian rugby football.

Attendance was at an all-time high. The sport dominated the television ratings, and Tina Turner was its glamorous pitchwoman, belting out the Australian Rugby League’s theme song, “Simply the Best,” for the cameras from atop Sydney Harbor Bridge.

Rugby’s raw toughness, its spectacle of men without pads or helmets dashing down a 110-yard field and hauling each other to the ground by brute strength, appealed to something bare-fisted and independent in the Australian temperament.

That was 1994, but it might as well have been an eternity ago: before the rugby civil war started, destroying careers and sundering decades-old friendships. Before the fans fled in disgust and disillusionment, and the very future of the game came into question.

In short, before Rupert Murdoch.

The Australian-born Murdoch’s News Corp. communications empire has enjoyed an enviable record over the years, expanding from a newspaper chain to embrace movie and TV production, cable and satellite broadcasting, and book publishing--and may soon include the Los Angeles Dodgers, whom Murdoch is expected to acquire.

Although often accompanied by controversy, even enmity, over Murdoch’s tendency to sacrifice taste for mass appeal, the company’s expansion reflects the determination and vision of its boss, who can spend millions on a project to silence doubters--and has more often than not proved himself right.

That determination has played out over the last two years on the field of Australian rugby.

Desperate for programming to attract subscribers to his new Foxtel cable TV operation here, and spurned by the official Australian Rugby League (which had a pay-TV contract with a rival company), Murdoch simply established his own league.

In a campaign a judge later attacked for its “secrecy, suddenness and deception,” Murdoch’s agents cajoled scores of the original league’s top athletes into defecting by offering them huge cash bonuses and double or triple their salaries. Teams that resisted News Corp.’s offers to jump to what it christened the Super League were told they might soon find new, better-financed teams in their backyards.

“This has destroyed a lot of people’s lives, mine included,” says Kenneth M. Arthurson, 69, ARL chairman for 14 years before the stress of fighting News Corp. forced him to retire in March. “It’s not about football but about pay television and corporate greed.”

The effort, which so far has cost the Murdoch empire about $300 million, speaks eloquently of the importance of sport in the founder’s business strategy. It further illustrates his determination to secure whatever corporate advantage he can, regardless of the cultural or commercial obstacles.

That’s germane because his expected agreement to acquire the Dodgers for more than $350 million would place him at the center of a game that is as much a traditional pastime in the United States as rugby is in Australia.

Murdoch’s involvement with rugby also suggests that, unlike some baseball owners--who may value the American game largely as a repository of tradition or an opportunity to rub shoulders with popular heroes--his interest in the Dodgers would be overwhelmingly commercial, a way to combine his already huge investment in baseball’s broadcast rights with ownership of a marquee team to create what could be a worldwide market giant.

Neither Murdoch nor his son Lachlan, a top executive in his Australian operation, was available to comment for this story. But the elder Murdoch told News Corp. shareholders at their annual meeting in October that he believes sport “absolutely overpowers” movies or any other kind of event as a draw for subscribers to cable and satellite TV.

“We intend to . . . use sports as a battering ram and a lead offering in all our pay-television operations,” he said.

Fallibility of Murdoch’s Empire

His assault on Australian rugby also demonstrates that the Murdoch empire is not infallible--because the creation of the Super League has to rank as one of News Corp.’s bigger blunders.

The lavish investment has produced dismal TV ratings and attendance figures that would shame the Indianapolis Colts. On recent weekends, some Super League teams have played to crowds as meager as 5,000 to 7,000, in areas where games used to draw three or four times as many. One recent major contest drew 174,000 TV viewers in Sydney, about half of what was customary in previous years.

In the older league, attendance is down more than 20% on average from 1995, and TV ratings are slipping--in part because the schism created by two championships has deprived the sport of some of its choicest regional rivalries. Meanwhile, team expenses have soared, mostly because of the higher salaries demanded by players.

Now the bruising war has come full circle. With the sport hanging in the balance and the money hemorrhaging, the leagues are trying to negotiate a merger that might end the damaging rift as early as next year. It is something fans, broadcasters and officials of both leagues agree is essential to rugby’s survival as a pro sport here--much like the National Football League’s absorption of the renegade AFL in 1970.

At the moment, the talks are at a standoff. Negotiations most recently broke off Aug. 17 over financial control of the game and cable rights, with each side convinced it has something the other needs: News Corp. has the money and the “global vision” needed to take the game to the “next step,” as its executives have proclaimed; the ARL has credibility and tradition.

“Others can argue all they like about global vision,” says Neil Whittaker, a former player and ARL chief executive. “In [this sport] you can’t go global without Australia, and that’s us.”

His league’s credibility may indeed be crucial, because in the rugby world, News Corp. has precious little of it left. It is widely seen by fans here as the spoiler of a national institution, and feared as an entity with great newspaper and broadcasting clout in the country.

“They want to set up a lot of sterile franchises that have as much character as a 3-day-old piece of toast,” grouses Tim Miller, a supporter of the ARL champion Manly Sea Eagles.

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Such sentiments irk News Corp.’s director of sport, Ian Frykberg, who is handling the negotiations with the ARL. He says his company’s efforts to enhance its bottom line were never intended to undermine the game.

“People question News’ motives because it’s a big company coming in to control what’s perceived as a community asset,” he says. “But it’s clearly not in News’ interest to make decisions that would damage the game.”

News Corp. earned a profit of more than $1 billion on revenue of $11.2 billion in the year ended June 30, making its investment in the Super League not necessarily material but too large to ignore. “News has entered into something here,” Frykberg says, “and is not going to walk away from it.”

To grasp Murdoch’s hunger for Rugby League--as the sport is called--it first is necessary to understand its stature in Australia. It is seen here as the quintessential workingman’s game. That attitude derives from its origin in England 102 years ago, when its founders were cast out of the upper-class sport known as Rugby Union for insisting that laborers’ wages be made up when players missed work to represent their teams on the field.

The new laborers’ league reduced each team from 15 men to 13 and made other changes to speed up the game, in which players advance up a field by running and making lateral and backward passes of a torpedo-shaped ball.

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The sport soon won its greatest popularity in Australia, which produced the most storied players. It’s not unusual for people here to cherish an identification with the sport or an individual team that goes back generations. Listen to one prominent Australian:

“There’s a family legend that my father met my mother at a rugby game where he was playing. He’d seen her around town, and the story is that he approached her in the stands during a break in the game caused by a fight on the field, which he instigated.”

The speaker is Thomas Keneally, fervent supporter of the Manly Sea Eagles and prolific novelist.

Keneally, best known in the United States as the author of “Schindler’s List,” has explored such issues as the historic plight of the aborigines and the legacy of British rule over Australia. That gives him a distinct perspective from which to observe the importance of sport as a unifying tribal experience for Australians.

“I grew up in an age when there was no Australian cinema or literature or music,” he says. “The only way out of cultural ignominy was to score a century at the Oval before lunch,” he adds, referring to scoring 100 runs at cricket.

A Sunday visit to the Sea Eagles’ home ground suggests why so many fans are left cold by Murdoch representatives’ talk of taking rugby by satellite to the “next step” of global popularity.

The game’s very essence is its accessibility. Long after delivering a 48-14 pasting to the Western Suburbs Magpies, the Manly players can be found in their dressing room surrounded by children seeking autographs. Keneally’s compliments to favored players (“Good on ya, Terry”) are accepted with an earnest “Thank you, Thomas.”

The team repairs up the street to the Manly Leagues Club, a combined community hall, restaurant, bar and video poker parlor that sponsors and subsidizes the team for nearly $2.5 million a year. The players mix with their fans and hold a modest awards ceremony for outstanding performers of the game.

This homey atmosphere was reflected in the ARL’s structure as a loose agglomeration of local rugby clubs. Any profits were plowed back into the game to support junior-level teams and training camps. The resulting system was perfect for preserving a slow-changing sport as a community asset.

But changes were coming against which the old guard was dangerously short of defenses.

Growing Unhappiness With the Status Quo

The key year was 1994. League games attracted a record 2.5 million fans--remarkable in this country of 18 million--and the sport’s TV ratings outstripped those of all other winter sports, including soccer and Australian football, a rugby offspring played on an oval.

But within the league, discontent with the status quo was brewing. For although the sport was growing in popularity, only one of its 20 teams was profitable. Many others were kept afloat by the infusion of ever-larger subsidies from the league clubs’ video poker terminals.

The problem was that the insular ARL had never come to grips with Australia’s changing demographics. Of the 20 teams, 11 were located in Sydney or its suburbs, where the league was founded, while potential new markets such as Melbourne went unexploited. League officials were reluctant to take the painful steps toward closing, moving or merging 90-year-old community institutions.

“The fact is, Sydney is the spiritual home of the game,” Arthurson says.

Such conservatism grated on the sole profitable team. The Brisbane Broncos had come into the league in a 1988 expansion with a monopoly over their huge home city, 500 miles up the coast from Sydney, and the surrounding state of Queensland. Unique in being privately owned (the founders included Paul “Porky” Morgan, a Runyonesque businessman who had made a fortune by financing the hit movie “Crocodile Dundee”), the Broncos injected a new sense of entrepreneurship into the staid old league.

They undertook their own marketing and merchandising, and evaded the league’s salary cap by awarding players lucrative commercial endorsement deals through a separate marketing arm, turning some into national stars.

These policies created a widening rift with the league establishment. Brisbane felt slighted by the Sydney cabal in everything from unduly harsh penalties imposed on Brisbane players charged with fouls to the league’s refusal to schedule popular all-star exhibition games in the Broncos’ stadium.

“In sport in Australia, ‘profit’ was a dirty word,” says John Ribot, a former Australian national team star who became the Broncos’ chief executive. “We used to challenge them all the time. We kept hitting brick walls, and they hated us asking the questions. Every year there was a point when they’d say, ‘Broncos, if you don’t like our competition, piss off.’ ”

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Finally, when the ARL decided in 1994 to establish a second team in Brisbane, the Broncos’ valuable preserve, Ribot called its bluff, approaching News Corp. with a scheme to create a stripped-down, all-star competition of 12 teams--a “super league” more elite than the ARL’s top level of competition. News Corp. would get a management fee for running the competition and, perhaps more important, the right to air the games on Foxtel cable. Murdoch’s people jumped at the idea.

Ribot, now a Super League executive, maintains that News Corp.’s marketing savvy and global reach made it a natural partner of ARL.

“I’d say News [Corp.] is a savior,” he says. “You don’t go through life being scared of these people, but respecting what they have to offer.”

After rumors of a News-sponsored league began to circulate, along with hints of the Broncos’ involvement, Arthurson extracted loyalty agreements from all 20 teams committing them to playing only in ARL-sanctioned games for the next five years. This formalized what had been a loose corporate arrangement and strengthened the league’s claim to be the sole custodian of an Australian institution.

As a result, when News executives finally made their formal proposal to the ARL in February 1995, it went over badly. News proposed making a $100-million investment in its elite roster of 12 teams (including only four in Sydney). The ARL would keep its role of supervising the rules of the sport and three or four levels of junior-grade--essentially farm team--competition. But existing ARL teams for which no room could be found would have to merge, move or vanish. And News Corp. would control the main schedule, hold a majority of seats on the Super League board and own the pay-TV rights.

The ARL viewed the plan as a way for News to relegate the league to a figurehead position in its own sport, but that was only one problem. An even greater obstacle was that cable TV rights to ARL games were not for sale. Murdoch archrival Kerry Packer had bought them through the end of the century for a nominal $1 million in 1993, when cable TV was barely on the Australian horizon.

Just in case the ARL was thinking of wavering, the burly Packer followed the departed News executives into the February meeting with a threat to back up his contract in court.

“If anyone in this room thinks they don’t have a contract with Channel 9 and tries to break it,” he growled, “I’ll come after you personally.”

On the surface, that settled the Super League issue. “If we continue to stick together,” Arthurson told the teams, “no one, not even Rupert Murdoch, will break our game up.”

But he sensed that the fight was not over. News’ strategy, he feared, was to divide and conquer, and he awaited the next sally.

He was right. News executives had already drawn up a battle plan for what they called a “blitzkrieg.” This, as Federal Court Judge James Burchett later remarked in a blistering 200-page ruling temporarily halting the implementation of the Super League, was “a meticulously planned operation” aimed at leaving the ARL “defenseless against a virtual takeover by News.”

On March 23, according to court documents, News executives presented a program to Murdoch calling for establishing a rebel league for about $60 million by signing about 200 key players at twice their ARL salaries. Although his specific response is unrecorded, a week later the plan went into operation.

After a training session March 30, Canterbury Bulldogs Coach Chris Anderson quietly asked a number of his players to meet him late that night at a local hotel. Waiting there were Ribot and Lachlan Murdoch.

Each player was handed an exclusive contract with the Super League for as much as two to three times his salary, plus a signing bonus. They were not permitted to take the contracts with them or phone their families before signing. Seven did, receiving bonus checks on the spot.

Secret Meetings and $75,000 Bonuses

The blitz was on. By the time word of the clandestine signings reached the ARL the next morning, more secret meetings were underway. About 25 players signed on over the next few days for bonuses of up to $75,000 and annual salaries in the unheard-of range of $375,000 to $450,000.

The ARL responded with a signing frenzy of its own, backed by an emergency capital infusion of $40 million from Packer and Optus Vision, the cable TV system that held his pay-TV rights.

For weeks, the entire world of Australian rugby remained in turmoil. Players stood in line in front of the ARL’s downtown Sydney headquarters to strike their deals, then marched up the street to the Super League offices in search of better terms.

“There was no rhyme or reason to what we were doing,” recalls Phil Gould, who as the respected coach of the loyalist Sydney City Roosters spearheaded the ARL signing campaign. “We didn’t know the value of our players; you might see a $100,000 player, and they were paying him three times as much. Amongst it all, we paid a hell of a lot of money for mediocrity too.”

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When the smoke cleared, the Super League had signed more than 200 players. Six ARL teams, mostly from outside Sydney, jumped to the new league, which created four teams to fill out its schedule. Players who had spent their careers together on the Australian national team found themselves on opposite sides of the fence, divided by accusations of dishonor and greed.

After a court battle, the new league started play last March. (Both leagues’ seasons run though September.)

The ARL managed to hang on to 12 teams and many of its biggest stars, but the game it had nurtured was irreversibly changed. The run-up in player salaries severed the bond many fans had felt with their teams and left coaches talking in terms that suggest the American scourge of free agency is just around the corner.

“The Australian public can’t comprehend footballers getting $500,000 a year [$375,000 in U.S. dollars],” says Gould, who as a top player through 1986 never made more than $22,500 (U.S.). The sport “was very much the people’s game. Now they can’t relate to the exorbitant salaries the blokes get.”

As a final irony, Murdoch and Packer reached an agreement this summer for joint telecasts of both leagues’ games--giving Murdoch the access to rugby programming that he always wanted and that Packer had refused him. To ARL loyalists who stood up to Murdoch at Packer’s own insistence, the arrangement is the ultimate betrayal.

“It’s a pity they couldn’t have made the bloody deal in the first place,” Arthurson says. “Then none of this would have happened.”