Autumn of the Moguls: My Misadventures with the Titans, Poseurs, and Money Guys who Mastered and Messed Up Big Media

Autumn of the Moguls

My Misadventures with the Titans, Poseurs, and Money Guys Who Mastered and Messed Up Big Media

Michael Wolff

HARPER PERENNIAL

for Alison

Cover

Title Page

Prologue

Book ONE: Spring and Summer 2002

1 THE COMEDY

2 MY TABLE

3 LUNCH

4 THE POWERS THAT BE

5 THE PARTNER

6 MY THEORY

7 THE BALLAD OF JEAN-MARIE

8 IN THE SAME BOAT

9 BOB PITTMAN—A DIGRESSION

10 NOT GETTING IT

11 BARRY BUFFETT

12 AND THEN THERE WAS MURDOCH

Book TWO: Autumn

1 THE LIFE OF THE PARTY

2 AILES AND TRUMAN

3 MY DINNER WITH RUPERT

4 THE REHEARSAL

5 THE OTHER PANEL

6 THE FIRST DAY

7 THE MISSING (MEL AND SUMNER)

8 CHARLIE AND MICHAEL

9 MORE MICHAELS

10 KEN AND STEVE

11 MORE MICHAELS AND MORE DINNER

12 KURT AND HARVEY

13 TERRY, PETER, AND JEFF

14 THE MAN UP THERE

15 UNREAL PROPERTY

16 THE BIG EVENING

17 THE GUEST LIST

18

19 TINA

20 AND STILL MORE COCKTAILS

21 PINCH

22 THE FINAL DINNER

23 BARRY TRIUMPHANT—SORT OF

24 WALTER

EPILOGUE: WINTER AND SPRING

INDEX

Notes And Acknowledgments

About the Author

By the same author

P. S. Ideas interviews & features …

Copyright

About the Publisher

PROLOGUE

A flashback, already

On the tenth day of the new millennium, Bruce Judson, a former Time Inc.-er, left a long message on my machine. Judson, who had formerly been an assistant to various high-ranking Time Inc. ministers, was making a joke, which I only half listened to, about some meeting we had been at together.

Judson and I—with Time managing editor and future CNN chairman Walter Isaacson—had sat on a committee at Time Warner that had decided to recommend that the company not buy AOL in 1994. But why was Judson talking about this now? I wondered as I got into the shower.

It was only in very slow motion that Judson’s message started to seem coherent in a more or less breathtaking way.

Indeed, it is almost impossible to convey now, from several years’ remove (even knowing the ultimate outcome), the unlikeliness, the utter disconnect, the lunacy of the entire far-fetched scenario: that AOL would buy Time Warner, that Time Warner would let itself be bought.

Nothing, perhaps, in business history, had ever been this … farfetched.

Jumping from the shower, dripping wet, grabbing for a towel, I flipped on CNN.

A moment later, I got a call from Caroline Miller, the editor in chief of New York magazine, where I wrote a weekly column about the media business. She seemed both aghast and excited at the same time.

“What do you want to do?” Caroline asked, balancing the mundane and the momentous.

In fact, holding my towel, I was not at all sure what to do. I felt small and inconsequential.

“I don’t know,” I said. “I guess I better get over there.”

As I might run out to cover a fire, I threw on some clothes and caught a cab over to the news conference where they were getting ready to announce the merger.

What was the proper affect here? Were we supposed to regard this as just a business story? Market reach, share price, boardroom stuff, instead of alignments, power shifts, and virtual geopolitical moves? The auditorium was filling up with business, media, and technology reporters, which for a second seemed surprising—why were they here? Where were the reporters from the national desk? The foreign desk, even? (Is this just my bias, not thinking of business reporters as real reporters? And technology reporters as an even lower order?) We’re going to miss the meaning of this story, I started to think, because the right desk doesn’t exist. Perhaps there should be a corporate-state desk. In that light, the AOL—Time Warner merger might be up there at some Munich Pact—Suez Canal—League of Nations level, or an entirely new kind of corporate-historical concept.

Something else: Reporters at other kinds of events—political events, disasters, crime scenes—are always nosing about, kibitzing, asking each other what they’ve got, but at this event, everyone just sat down and waited to be told what was what.

For a black-helicopter moment, a power move so amazingly tectonic that history would be written from here, this joint press conference was pretty bland.

The long lenses and porta-video packs were down in front of the auditorium when Time Warner CEO Jerry Levin, looking professorial and rumpled in what would be much-analyzed chinos and open shirt, came onto the stage, followed by AOL chairman Steve Case, in J.C. Penney-ish gray suit, then CNN’s Ted Turner, then the new co-COOs Bob Pittman (from AOL) and Dick Parsons (from Time Warner), and then Mike Kelly, AOL’s CFO. Everybody but Case sat down on the Dating Game— like chairs. Case opened, forcefully. But did this mean that he was the big cheese or just that he was introducing Levin? Levin indeed turned out to be the real presenter. He gave the details, such as they were, of the deal, and the philosophy, such as it was, and sent the clearest signals, to the extent that any were clear, about what was actually happening here.

It was not a businesslike presentation at all—none of the overload of information that is customary at merger announcements, the charts and bullet-pointed handouts—but, befitting a moment of at least as much political as commercial significance, a wholly symbolic tableau, although all the symbols were carefully veiled.

To do justice to the many conflicting and various unuttered messages that were being sent here, it was, I thought, probably best to look at this the way we used to look at the lineups and hierarchies and seating positions on May Day in Red Square. But the press, much of which was now owned by the merged company and therefore suddenly (as long as I am in this metaphor) something like the Soviet press, took the most literal of views.

In this view, all mergers are good mergers. Or, if not, they are superseded by even larger mergers. Mergers, in other words, are inevitable—and therefore, in some sense, unchallengeable.

Indeed, just a few months before, in what was then the biggest media merger, CBS had combined with Viacom. (The CBS and Viacom merger and now the AOL and Time Warner merger received more column inches of coverage than any other mergers before them—not least of all, of course, because they were about the media itself.)

Win-win was the most popular instant analysis. I wonder if we were this brain-dead just because we were so caught off guard, or because we or our colleagues had, instantly, made so much money off the deal (nearly 2,000 Time employees made, at the moment of the merger, $1 million or more, estimated the New York Post) that it was hard to think through the euphoria or jealousy, or because, as business reporters, the whole point is just to analyze with respect to up-and-down and not with an eye toward character, or consequence, or forest-for-the-trees.

It was not just the biggest deal that had been done by any company ever—the capstone of twenty years of more and more outsized business mergers—but it was a statement of philosophy too. This is how the world will be; this is the future. Indeed, all big deals had always portended more big deals—you were just upping the size of the big-deal measure.

As I sat in the auditorium, I was pretty sure nobody was thinking about how we had reached this point.

It took an odd person to be able to remember all the deals that had led us here.

Indeed, part of why we were here was that Time Inc. was a terrible deal maker.

All but faded from corporate memory was the name Temple-Inland, a paper mill that Time Inc. had bought in the seventies—though, arguably, the paper mill had bought Time Inc. Forest products became a third of the Time Inc. business, and the Temple family, from Diboll, Texas, among Time’s largest shareholders. This hilarious combination was undone not too many years later in a deal that led Arthur Temple, who, in effect, was given his company back, to remark (apocryphally or not) that he felt like a whore—he sold what he was selling but got to keep it too.

But then you had Warner’s Steve Ross, who had converted his father-in-law’s chain of funeral parlors into a controlling interest in a parking garage enterprise, which in turn he had traded into a talent agency and then acquired the fabled, but mostly moribund, Warner name—and, virtually overnight, reconstituted an entertainment empire.

And yet, being a good deal maker did not necessarily mean you did successful deals. Because a great many of the deals that Steve Ross did were lousy. There was, for Ross and Warner, most memorably, and in a weird foreshadowing of what happens when old guys get enamored with technology, the Atari deal. In 1976, Ross acquired the go-go technology enterprise, and, in short order, it brought Warner to the edge of bankruptcy.

Indeed, most deals, we learn from the fine print of the history of mergers and acquisitions, turn out to be lousy deals.

But there are good lousy-deal makers and there are bad lousy-deal makers.

The Time Inc. guys were historically bad lousy-deal makers.

The good and the bad in this context most often emerges from what is called company culture.

The Time culture (which does not exist anymore at Time) was aloof and clubby. Working at Time was a higher calling than other professions. It was avocational more than vocational—you worked there because you were better than the people who were not working there.

If you looked a certain way, had a certain sort of Ivy League, good-sport-jacket, furrowed-brow assurance, the elevator crowds would really part for you at the Time Life Building. The secretaries and salespeople and whoever else worked there expressed an almost physical deference to the true Time man. And you always knew who he was, as clearly as you would a priest among the functionaries at the Vatican.

Much of this culture—this aloofness from the real world—came from Time founder Henry Luce himself: the son of missionaries, inheritor of Wasp rectitude and old-money Republicanism, he valued assorted snobberies more than mere money.

Hence, Luce’s corporate offspring, or the offspring of his corporate offspring, were, or feared themselves to be, corporate weaklings.

They were, for instance, afraid of Steve Ross. And, out of that fear, admired him.

Because he did deals.

But it wasn’t only gonifism on the rise, the triumph of the vulgar Hollywood Jews over the buttoned-down Wasps. It was not just a philosophical or temperamental tide, but a technical one as well.

You had to understand deals not just as the process of putting companies together to make bigger companies, but as a process of using money in a way that increased your ability to use more money.

Leverage was the thing.

Media was a financing game. Media was like real estate.

One asset was meant to mortgage another.

The more you mortgaged, the more you could mortgage.

The more deals you did, the more deals you could do.

It had been said before: If you borrow a little, the bank owns you; borrow a lot and you own the bank.

This required a head for numbers and hubris too—somebody with a big ego who could count. (Although there were many failed instances of men who tried to step up merely on the basis of hubris.)

Such men became the instruments for the creation of vast companies that were—sometimes to a fully realized degree, other times frustratingly falling short of their radical idea—not really companies at all, not collegial enterprises, not thematic expressions, not coherent functions, but extreme reflections of themselves and of their ability to do deals.

Simply, moguls led media companies. If you didn’t have a good mogul, you didn’t have a good media company.

The entire Darwinian process of the media business was not about the winnowing out and promotion of good media, or good companies, but the natural selection of good moguls.

And the whole game was the rise and fall of these sui generis, savantlike beings—around them, you might argue, the business itself became something of an afterthought.

And so, in the nineties, there was the Time and Warner merger. Then there was the deal under which—to hold down the massive debt incurred from the Time and Warner deal—a piece of Time Warner’s entertainment and cable companies was sold to John Malone, another of the media business’ great lousy-deal makers. Then CNN was acquired (ruining that company). And along the way there were hundreds of other transactions, bigger and smaller. Then, on January 10, 2000, Time Warner announced it was merging with AOL. (Days before the announcement, I was flipping channels and paused for a moment on a CNN show that had on its panel Jerry Levin, Isaacson, media and culture commentator Kurt Andersen—also a former Timer—and the New Yorker’s mogul-fanzine writer Ken Auletta, talking about the future of the media. Suddenly, in the discussion, Levin, who probably knew he was soon to announce the largest merger in history, started to talk about governments‘ fading and some new sort of corporate city-states’ rising and how the world would be mediated in some vaguely sci-fi-ish New Agey Rollerball digital way.)

The Time Ivy Leaguers (grown weary and depressed through the nineties), the Warner Hollywood heavies (many of them alter cockers now), and the ever-more-furious Ted Turner were married to some suburban database hucksters from Dulles, Virginia.

There was certainly no sense in the auditorium that this was the last merger. That this deal might define a level of overreach and prompt a turnaround.

After all, deals had always gone wrong, and we all still had jobs.

But, in fact, no deal had ever gone wrong like the AOL—Time Warner deal was in short order going to go wrong. This would be the worst deal ever made, defining not just a level of bad deal making, or of inimical corporate cultures, but of the profound lack of science in any deal. Not just a tissue rejection, but a whole set of doctors who had no idea what they were doing. Forevermore, in every media deal, this would have to be an operative question: Do they know what they are doing? Do they know what they are talking about? What planet are they on? And what do they smoke there?

Nobody knew it yet, but we had commenced a new phase, a whole new era, of resistance and revision.

January 10, 2000, was the beginning of the end.

1

THE COMEDY

The media business is collapsing. The structure is caving in, like a monarchy, or colonial rule, or communism.

The handful of companies that control the consciousness of our time are trembling and heaving, about to fall victim to internal weakness and external obsolescence.

If by the spring of 2002, this seemed obvious to many logically minded people, what logic did not account for were the moves and countermoves, as well as the pure denial, that delayed the inevitable end. Logic was up against the kind of powerful men, progressive business theories, public relations resources, and mountains of financial analysis—not to mention lots of charm and brutishness—that make most reporters and columnists end up believing that the moguls and their henchmen who run these businesses really do know what they’re doing and that the next big deal is the big deal that will bring about a perfectly realized, synergistic business condition.

Now, it is not just spin and spreadsheets that obfuscate the real predicament of these colossuses, but the media culture itself. The media, like all social and political systems, works on its own behalf. The social reality—to be a player in the media is to be among the most powerful people of the age—belies a contrary business reality, that the business barely supports itself.

We are in a novel of manners—the pretense is the thing.

Therefore, to tell the story of the media, you have to tell the story of the rituals and conceits and behavioral norms and notions of propriety that hold it up.

Instead of a purposeful business story, it should be something more like a drawing room comedy—not a story about corporate success and failure as much as one about individual need and weakness and, of course, opportunism.

How to reduce such vast companies and so many divergent players to a small stage? How to bring such outsized men with their praetorian retinues into the same room?

The task was to find these people in their element, to move among them seamlessly. To be of them—but not employed by them (or, even worse, sucked up to by them—because their charm is not ordinary charm).

How to find the functional equivalent of a weekend at an English country house with a representative set of mogul kingpins as the guests?

Indeed, if business is the center of the modern world, which most certainly it is, then we have to find the dramatic context in which to reveal its true character.

Let us wait for such an opportunity.

2

MY TABLE

In the spring of 2002—in the year of the autumn in question—I received an official, even ceremonious, invitation to have lunch with two journalists I knew from the Internet years (already sounding like some druggy past, or a best-forgotten unpopular war). They had a proposal to discuss. We want to bounce something off of you, one of them said in an email.

And so we met at Michael’s. To have lunch at Michael’s seemed specifically part of their point here.

You step into the door on West 55th Street, in a building once owned by the Rockefellers, and get a greeting from Michael himself (when he’s in from the Coast—Michael’s has a sister restaurant in Santa Monica), in brilliantined hair (recently he’s been sporting a new floppy cut), or from one of the oddly nurturing (“You look great today”) front-desk people. Then, from the top of the few steps leading down to the spacious dining room with good art and many flowers, you see everybody else in the media business who wants to be seen.

I have a table. It’s table No. 5, which is a very good table very near the front of the room. Its sight lines go directly to the entryway, and its back is secured by the east wall (in view of table No. 1 in the bay with Caroline Kennedy playing with her hair or Mick Jagger drumming his fingers or Bill Clinton monologizing his luncheon companions). Among the things I have never expected or wanted to achieve is a table of my own (like Winchell at the Stork Club). Still, this takes nothing away from the satisfaction of having gained a contested piece of turf. (There is a menacing back room at Michael’s where faceless people are led every day, never to emerge.)

Before Michael’s was Michael’s, it was the Italian Pavilion, which in a former heyday of media life had a serious following among advertising and network types. My father was in the agency business and once took me to lunch here and pointed out Bill Paley, the chairman of CBS and the most powerful and elegant man then alive.

I think this is part of the Michael’s attraction: It recalls the other, more salubrious, three-martini era (occasionally, someone will even have a martini at Michael’s), when media was the easiest game in town, when the world was made up of a passive audience and eager advertisers, when the money flowed like gin—as opposed to now, with media being a tortured, hardscrabble affair. A bleak, unpromising, Darwinian struggle.

I sometimes think this is part of the running joke. When you’re making a lunch date and say to someone, “Michael’s?”—they’re in on it. The joke is that all these media bigs show up for lunch and pretend everything is just fine and still supporting these incredibly expensive meals, while waiting for the person at the next table to break down in tears (at any given moment, everyone knows who will likely be crying next).

In other establishments like this—the Four Seasons, for instance—there’s a certain sort of pretense. People in a gated community pretend that they live the lives of people outside the gated community, or pretend the gated area is normal life.

But Michael’s isn’t like that. Everybody is open about being on the inside. It’s like a prison yard.

We’ve crossed the existential Rubicon from social and economic anxiety to an oddly pleasurable self-loathing.

If there once was a media Eden, we are its wastrel and prodigal children with bad work ethics who messed it up and were cast out of the garden. In another sense, we are just unfortunate children, who, through no fault of our own, inherited overplanted fields and poisoned air and changing weather conditions. Whatever.

I have another metaphor, which is Vichy. This makes Michael’s a kind of Rick’s Café Americain.

Pushing this metaphor, the media business, through this last twenty years, has become occupied territory.

The media business used to be run by insiders. People who grew up in those businesses, and people, who by virtue of a certain New York-ism were of a family. But then outsiders, not-of-our-class outsiders, took over.

In a twenty-year period, virtually every media company and every sector of the media industry—book, newspapers, magazines, radio, television, movies, music—came to be controlled by people from outside the clan.

The mogul invasion began—not just your usual business types, but a whole new class of rougher, ruder, preternaturally cunning businesspeople.

A sense of insider resentment or snobbishness or rebelliousness would occasionally express itself. But the stronger sensation was clearly a desire to adapt. Resistance in this situation, where economic ownership passes from one regime to another, is, strangely, almost unknown. Ownership is granted a kind of moral standing. There is no model for saying we will not submit to capital. (When Rupert Murdoch bought New York magazine in 1977, the staff walked out—but that really may be the last time there was clear resistance, and, of course, it was pointless.) It isn’t like, for instance, France. Even though these are cultural industries, you can’t talk about cultural patrimony—or a cultural exception. Although there have been federal rules that regulate exactly this, that notion—that there is something here that transcends the marketplace—that this is a special and fragile area, seemed feeble and pantywaist. For a while book people said it, but then nobody said it anymore.