News Corp.’s China moves a worry in U.S.

Times Staff Writer

Fears that Rupert Murdoch would jeopardize the editorial independence of the Wall Street Journal have been a key sticking point in the News Corp. chairman’s proposed $5-billion takeover of the newspaper’s parent, Dow Jones & Co.

Critics cite as the latest example of those dangers Murdoch’s little-noticed introduction in China of his red-hot MySpace Internet property.

Launched in April, MySpace China censors user comments on the social-networking site more than is necessary, analysts say. Its local ownership, they say, means the venture is obliged to cooperate with authorities more than it would have had to if it were based outside China.


Murdoch has paid close attention to the launch, bypassing News Corp.’s chain of command. His Chinese-born wife, Wendi Deng Murdoch, a former executive at one of News Corp.’s Asian operations, recently was named the venture’s strategy chief, her first executive role since marrying the mogul in 1999.

“It’s the first thing she’s been active in,” said a longtime senior News Corp. executive who socializes with the Murdochs. “Her involvement has been her husband, their two children -- and now MySpace China.”

News Corp. executives would not comment for this article, but company insiders say Murdoch felt safest trusting a member of his family with the delicate assignment. He sees China, with its huge population and rapidly blossoming middle class, as the final frontier for his empire, which reaches every corner of the globe through newspapers, satellite TV services, films, TV shows and networks such as Fox News and the soon-to-launch Fox Business Channel, which is set to debut this year.

Like most other Western media companies, News Corp. has been frustrated by the Chinese government’s reluctance to open its airwaves or theaters to outsiders. Internet companies are subject to less regulation, so Murdoch hopes MySpace will grow on its own merits, enabling him to promote other News Corp. properties while showing the Chinese government he can be a trusted partner.

Murdoch’s relentless expansionism, however, has become a barrier to his takeover of Dow Jones. News Corp. sees the Journal as a way to bolster the new financial news channel, but Dow Jones’ controlling Bancroft family has been wary. On Friday, Dow Jones’ board sent News Corp. a proposal aimed at protecting the paper’s editorial integrity by keeping Murdoch at a distance from reporters, including a team that won a 2007 Pulitzer Prize for stories from China on such topics as deadly factory pollution, illegal coal mines and development in Tibet.

The plan calls for creating a seven-member panel that could stop top editors from being fired, with two members picked by the Bancrofts, two chosen by News Corp. and three selected jointly.

The proposal follows protests by seven of the Journal’s China reporters and others over Murdoch’s past attempts to cozy up to the regime.

Seth Faison, who covered the 1989 Tiananmen Square massacre for Hong Kong’s South China Morning Post when Murdoch owned it, said in a radio interview last week on KCRW-FM (89.9) that a News Corp. executive pressed him to “tone down” coverage of the government because the company was trying to negotiate a television deal with Beijing at the time. Faison, a former New York Times foreign correspondent, now works for public relations firm Sitrick & Co.

Murdoch has had his share of scrapes with the Chinese government. He controlled Hong Kong-based Star, a satellite-TV service that beams programs to the mainland and at which Deng Murdoch was an executive when she met her future husband.

But Star was banned from the country after Murdoch made remarks about technology’s “unambiguous threat to authoritarian regimes.” Murdoch tried in subsequent years to get back into China’s good graces. In 1994, after Chinese authorities complained about broadcasts by the BBC critical of the government, News Corp. dropped the channel from Star.

“We’re not proud of that decision,” he said later.

The next year, News Corp. printed a worshipful biography of the late Chinese leader Deng Xiaoping written by his daughter, who was escorted to her news conference by Murdoch.

In 1998, News Corp. reversed a decision to publish a book critical of Beijing written by the last British governor of Hong Kong.

Little attention has been paid in the media to MySpace’s recent expansion in China. Already the fifth-most-visited website in the U.S. and a growing force abroad, the dominant social-networking site launched a Chinese version that analysts said goes out of its way to keep users from discussing topics sensitive to the government.

Before the introduction of MySpace China, which carries the slogan “Friend you, friend me,” mainland residents connected to Beverly Hills-based with the same freedom of expression as users anywhere else., the address of the new local service, allows visitors to use Chinese characters but prevents them from blogging about Tibetan religious leader the Dalai Lama, Taiwanese independence and many other subjects. Such phrases and searches for those topics are blocked as “inappropriate,” said Jeremy Goldkorn, a journalist and editor of the blog on Chinese media.

“It’s probably a combination of automatic keyword-filtering and some kind of human editor,” Goldkorn said from Beijing.

To such experts on the Chinese Web as Xiao Qiang, self-censorship at MySpace China is a natural result of the News Corp. decision to establish the venture locally. Xiao and others said Western companies have more leverage in operating in China if they are based outside its borders. For instance, MySpace China could then find it easier to be explicit in disclosing its censorship policies, said Xiao, who edits China Digital Times from UC Berkeley’s journalism graduate school.

China-based firms must be majority owned by Chinese citizens or companies and are more directly subject to Chinese laws, such as those barring the spread of “rumors” and material “subversive to the state.” The laws are so vague that local companies often err on the side of caution when trying to judge which content might be deemed offensive, Xiao said.

Google Inc. and Microsoft Corp. have been criticized for omitting search results, censoring blog posts and the like, but are developing codes of conduct that would take steps against Chinese government dominance, said John Palfrey, executive director of Harvard Law School’s Berkman Center for Internet & Society. Palfrey said such codes could include promising that when a post is taken down for political reasons in China, it will stay up for viewers in other countries or for Chinese viewers who can bypass government filters.

Because MySpace China is in local hands, “it is on the far end of retaining control, and that is more likely to result in less protection for civil liberties,” Palfrey said.

MySpace China executives declined interview requests, and News Corp. officials also would not comment, citing the sensitivity of issues related to China and Murdoch’s wife, who has been something of a lightning rod within the family.

Rupert Murdoch’s eldest son, Lachlan, who was considered the heir apparent to his 76-year-old father, relinquished his executive position with the company two years ago, in part to protest modifications Deng Murdoch was seeking of a trust set up to pass control of News Corp. to Murdoch’s four oldest children.

A compromise was reached last year under which Murdoch’s two young children with his current wife would get shares equal to those of their four older half-siblings, but the four adults would retain voting control.

Privately, Murdoch lieutenants portrayed MySpace China’s local ownership as a blessing for News Corp., because the parent will be spared from many of the hard decisions that Google and Yahoo have faced.

In other words, MySpace China can please the government without Murdoch getting much heat from outsiders. Officially, News Corp. licenses the MySpace name and software to MySpace China, and is only a minority investor. A key partner in the project is China Broadband Capital Partners, an investment firm run by former telecom executive Edward Tian.

But News Corp. executives said Murdoch still calls the shots. Tian is a good friend of the Murdochs, and Beijing analyst David Wolf said that because Murdoch and Tian “see each other as kindred spirits,” Tian could be expected to act as Murdoch wishes.

Deng Murdoch has been described as a MySpace China director, but News Corp. spokesman Andrew Butcher confirmed that she also serves as “chief strategy officer” despite her New York residence. She keeps an office at MySpace in Beverly Hills and has sat in on senior staff meetings, according to employees there. She flew to China three times late last year to set up the business, said these people, who asked not to be named because they were not authorized to speak on the record.

“It’s a minority investment in name only,” said one former News Corp. executive familiar with the setup.

Butcher denied that Murdoch was in charge, saying: “It’s wrong that News Corp. is driving the train.”