COVER

PAPER TIGER

Canadian Conrad Black is testing his mettle in a bitter British newspaper battle

BRUCE WALLACE August 1 1994
COVER

PAPER TIGER

Canadian Conrad Black is testing his mettle in a bitter British newspaper battle

BRUCE WALLACE August 1 1994

PAPER TIGER

COVER

Canadian Conrad Black is testing his mettle in a bitter British newspaper battle

BY BRUCE WALLACE in London

The Garrick Club is 163 years old, which is not old at all by the standards of London’s private clubs. It was founded as a place for actors to meet gentlemen, actors not being considered gentlemen in Victorian England, and it remains devoted to that mission in two respects: its membership is drawn heavily from the arts community, and its doors remain open to gentlemen—only. So a small dining-room in the Garrick seemed an appropriate place for the esteemed publisher Harold Evans to hold court one day last month on the evils of his former boss, Rupert Murdoch.

The Australian-born Murdoch is the world’s pre-eminent media baron, whose empire stretches from newspapers to movie production and satellite television. But he is best-known—and most reviled—for publishing tabloid papers that mix stories about sex with stories about sin. Evans worked for Murdoch at The Times of London, but quit in 1982 after one year and one collision too many with his boss. Murdoch, he now says, is a liar and a doublecrosser who tried to drag the stately 209-year-old

Times down market to the level of what Evans likes to refer to as his “bordello of papers.”

Only one of the 11 other London me-

dia executives lunching around the mahogany dining table in the Garrick Club spoke in Murdoch’s

defence: Conrad Black, publisher of The Daily Telegraph, London’s largest quality newspaper, and a press baron

of considerable heft himself. Rupert may print trashy newspapers, said Black, who was the only one present to refer to the demonized publisher by his first name. But he is a brilliant businessman who has been good for the British newspaper industry.

Black’s defence was remarkable given that the very next day he would lead The Telegraph PLC, the public company that owns the newspaper, into the kind of no-holds-barred circulation war with Murdoch that Britain had not seen since the heyday of the 1930s press lords. Last year, Murdoch audaciously slashed the cover price of The Times from 45 pence (94 cents) to 30 pence. For 10 months, Black held the Telegraph’s price at

'When you get right

down to it, Murdoch thinks the

average person is a slob7

48 pence, content to fight for readers with promotional gimmicks rather than matching the price cut and doing deeper damage to his profits. But when Telegraph PLC executives phoned him in Toronto during a business trip in early June to tell him that the previous month’s circulation figures were particularly bad, Black had to act. The Times’ daily circulation had climbed to 517,575 from 356,000, at a time when the Telegraph’s own numbers were slipping below one million a day, a level they had not gone under since 1948.

When Black finally slashed the Telegraph’s price to 30 pence on June 22, the fallout was ugly. Fears that the price war would vaporize newspaper profits caused Telegraph PLC shares to fall by more than a third on the London Stock Exchange the next day. That left the company’s investors—some of whom had bought $153 million worth of Telegraph company stock from Black’s own company, Hollinger Inc., just three weeks before—feeling especially burned. City of London authorities absolved Black of any ethical misconduct, saying that there was no evidence that he planned to cut the Telegraph price when he sold the shares. But many investors remained furious. Cazenove & Co., one of the

City of London’s most venerable firms, resigned as The Telegraph PLC broker on June 30. And some investors muttered that it would be a

long time before Black would be able to come back to the London exchange to raise money.

Meanwhile, Murdoch kept up the pressure on Black by hacking another 10 pence off The Times’ price. His “en-

emy,” as he had made perfectly clear a year earlier during a meeting with Australian investors, was the Telegraph. Leave the Telegraph to me, Murdoch told Sir David English, whose company publishes the rival Daily Mail. “I’ll put them out of business for you.” With the London newspaper industry in the midst of what Black called “Darwinian chaos,” Murdoch opened a second front in Australia: he purchased a small stake in John Fairfax Holdings Ltd., that country’s second-largest chain of newspapers, which is controlled by Black and his allies. Murdoch’s intention, said Daniel Colson, the senior executive in Black’s Australian and British empires, was simply to “irritate and destabilize us.”

Black was more blunt. “Rupert is opening his arteries; he is trying to kill us,” Black told one interviewer. In Australia, Murdoch’s tabloids published stories suggesting that the Telegraph would lose money this year, and questioning Hollinger’s solvency. Black’s Sunday Telegraph responded with a story about Murdoch headlined “Falling star?” speculating on how his Asian satellite television network, Star TV, was gobbling up hundreds of thousands of dollars in start-up costs. Both sides were heaving hardballs. “There will be blood on the carpet,” warned Telegraph editor Max Hastings. “Stop behaving like a Serb, Rupert,” scolded Paul Johnston, writing in the pages of the Black-owned magazine The Spectator.

It must be understood, the barons insist, that none of this should be taken personally.

“I yield to few people in my respect for Murdoch,” says Conrad Black, sitting in his darkened 15th-floor office in London’s Canary Wharf on a smoggy July afternoon. “Indeed, up to a point, he is a friend of mine. He invited us [Black and his wife, Barbara Amiel, a Maclean’s columnist who also writes a weekly column for Murdoch’s Sunday Times] to his daughter’s wedding, and we are reasonably friendly with him socially. I’ve always been a defender of his, unlike most people you encounter in this business.”

Black continues: “But he’s a funny guy. He’s a cynic. When you get right down to it, Murdoch thinks the average person is a slob, with his belly full of beer, falling asleep in front of a pornographic movie on television, and if you just bring things down far enough he’ll buy it. It never sits very easily with Rupert to run a quality product. And by making all these ridiculous, indiscreet remarks about putting us out of business, he has offended a lot of people, and made it possible for us to seem like a giant killer just by staying alive and holding our position.”

It is three weeks into his battle with the world’s most fearless and predatory media baron and Black says he doesn’t know why everyone thinks his position is so awful. New underwriters are knocking on his door. Sure, the City investors are upset, but they’ll come around. Black has been making the rounds, seeing them all privately, and he says that many investors are getting over their early jitters about the effect the price war will have on the Telegraph’s corporate bottom line. Although the cut will cost the paper an estimated $44 million in revenues this year, Black says that other savings can limit the loss in profits to $22 million. Meanwhile, he estimates that, by cutting The Times’ price to 20 pence, Murdoch is set to lose $85 million this year. “Is that an intelligent use of his money?” Black asks. “By traditional standards, it is madhouse economics we are dealing with here.”

But the conventional wisdom in business circles from London to Sydney still revolves around the concept of “deep pockets,” and Murdoch’s, most people believe, are deeper. The theory is that Murdoch’s News Corp. International, far wealthier than Black’s Hollinger, is able to subsidize a long price war during which time The Times can challenge the Telegraph’s dominance. Black isn’t buying it: “a load of bunk,” he calls the scenario. The current circulation battle is costing Murdoch so much money, says Black, that “before he can put significant pressure on us, his pockets are going to have to be well below his ankles.”

Indeed, most of the harm done so far has been to Black’s prestige and image, so carefully cultivated over the last decade. When he arrived in London in 1986 to take control of The Daily Telegraph, he was a little-known colonial who was greeted with great suspicion. The first profiles in British papers, many written by Canadians, were unflattering. And the Telegraph's outgoing owners, the Berry family of Wales, which had owned the paper since 1927, had tried desperately to find someone, anyone, else to sell the paper to.

But Black’s stewardship of the Telegraph proved wildly successful. He quickly restored the paper to profitability. He worked hard to al-

It is madhouse economics we are dealing with here7

lay investors’ fears that he was just another in a long line of headstrong, debt-addicted media tycoons, and convinced them to let him take the Telegraph public. He then used the newspaper’s cash to expand Hollinger’s holdings into one of the world’s great newspaper empires. Although the recent price war may have altered the equa-

tion, Hollinger’s stake in the Telegraph was recently responsible for almost 75 per cent of its earnings.

Since the late 1980s, Hollinger has ac-

quired the daily Jerusalem Post, 19 per cent of Southam Inc. in Canada and a controlling 25per-cent stake in Fairfax. Last April, Black bought the Chicago

Sun-Times for $160 million, adding it to Hollinger’s American publishing group of otherwise small dailies and weeklies. In all, Black publishes 490 daily and weekly

papers, reaching nearly five million readers a day. All the while, he breathed the rarified air of London social and business circles as befits the publisher of the most powerful Tory newspaper in Britain. On the cusp of turning 50, Black was even able to publish an autobiography with the not-so-humble title A Life In Progress.

The events of the last two months have tarnished that image. The gravest wound was the tumble in the Telegraph’s stock value so soon after Hollinger sold 12.5 million of its shares. Many investors did their bellyaching in public. “The credibility of the management is somewhat

It never sits very

easily with Rupert to run

quality product7

suspect and their reputation has been severely damaged in the eyes of the City,” says Richard Peirson, investment director at Framlington Group PLC, a small but longtime Telegraph shareholder. “He has pissed off the establishment on this one,” says Hylton Philipson of Pall Mall Ltd., who has done several North American deals with Black.

The harshest blow may have been Cazenove’s resignation as the Telegraph’s broker, a decision that Black insists was mutual. Cazenove is the bluest of blue-blood firms, and dropping The Telegraph PLC— the first such act in “recent memory,” company officials said—is a stain

on Black’s reputation. A Cazenove official told Black that the company felt it had to do the “honorable thing,” but Telegraph company executives were outraged. “Cazenove’s behavior was extremely disappointing,” says Telegraph vice-chairman Colson. “When a client runs into flak, you don’t run for the tall grass.”

Meanwhile, Murdoch’s executives—or what Black calls “his numerous spear carriers and bootlickers”— argue that Black displayed a glaring lack of business judgment in failing to match The Times' price cut right away. “Black has already made the crucial error in this war,” said one senior Murdoch executive who did not want to be named. “In the history of newspapers, all the great proprietors never let the grass grow under their feet They reacted right away.” Indeed, the blueprint for The Times strategy is the successful price war launched in

1930 by The Daily Telegraph itself, when it cut its price in half from two pence to a penny. Circulation nearly doubled in six weeks, sending the Telegraph on its way to becoming Britain’s largest daily.

Imagine accusing Conrad Black,

who prides himself as a historian, of not knowing his history. Black ab lows only a “maybe” when pressed on whether he should have matched The Times’ price cut immediately. “If you speak of military history”—and Black loves to—“it is always useful to get your opponent to commit as much resources as he can before you have to fire any live am-

munition yourself,” he says. He used the time to retire some of Hollinger’s debt And by delaying the price cut for 10 months, he says, The Telegraph PLC is richer and bet-

ter armed for battle.

“Look, it is no time for complacency,” says Black. “We are dealing with a formidable adversary; Rupert is a bold man. He

is like—and I make this comparison in one sense and one sense only—the early Hitler, always wanting a ruse de guerre because he always thought his opponents

were ninnies who would react too late and indecisively. He was hoping that we would be so attached to our cover price that we wouldn’t move to meet the threat when it came. But he’s not vain. When something doesn’t work, he abandons it and tries something else. “Murdoch’s not mad, you know.”

By circumstance and tradition, the publisher of The Daily Telegraph is a powerful player in British Conservative circles. Years ago, the paper was virtually the party organ. Now, its blend of rightwing politics, well-reported domestic news and healthy sports coverage is still the paper most favored by core Tory voters, the choice

of middle managers on their commute into London. Black inherited the power that comes with the station of Telegraph publisher, and he exercises it with clear joy.

“If I look back over the newspaper publishers I have known, it is only Beaverbrook with whom he compares,” then-Tory Defence Minister Alan Clark wrote flatteringly in his diary after first meeting

Black in 1990. The comparison to Lord Beaverbrook—New Brunswick’s Max Aiken who rose to become a powerful British publisher and adviser to prime ministers in the first half of the century—is often invoked, no doubt because both are Canadian. But both men also enjoyed owning their papers for social and political clout as much as for profit. “I run the paper purely for the purpose of making propaganda,” Beaverbrook told the 1949 Royal Commission on the Press.

Beaverbrook insisted that he controlled the content of his papers by hiring editors who agreed with him. And if they disagreed on an issue? “I talked them out of it,” said Beaverbrook.

Black, devoted to profits and alarmed at suggestions that he is a meddling proprietor, would probably cringe at some of the comparisons to Beaverbrook. (For one thing, when asked to name his favorite songs as a guest on the venerable British radio program Desert Island Discs, Black listed Londonderry Air by American gospel singer Paul Robeson. Robeson was one of the people on Beaverbrook’s blacklist of names that could never appear in his papers.) Black is still more likely to write a letter to his own paper when he disagrees

‘We would have to

be unprecedentedly

inept to lose this'

with something it has published, a practice that his London book editor Ion Trewin says “the British public find endearing.”

But he is not above issuing orders to editors. This year, he insisted upon, and recruited the writer for, a positive profile of South African Zulu Leader Mangosuthu Buthelezi. Black has long supported Buthelezi for his anti-Communist position, although the Zulu leader was widely perceived in the West as an obstacle to the country’s peaceful transition to majority rule. (The story did not completely sat-

isfy Buthelezi, who wrote to Black, thanking him but pointing out some “errors” in the piece.) But Black is mostly content to hire editors who share his conservative views and then leave them alone.

Still, Black grew concerned this year that the Telegraph’s editorial pages had lost their sharp conservative focus. The same day that he cut the Telegraph’s price, deputy editor Trevor Grove, perceived by the Thatcherite wing of the Tory party as too “wet,”

was fired and replaced with Simon Heffer, an uncompromising rightwinger. Hardline Tories had been screaming for Grove’s head since the late 1980s (“I’m not Conservative enough for them because I will vote Tory only once at elections, not three times,” Grove joked to associates), but, in the past, Black and respected Telegraph editor Max Hastings had protected him.

Black says that he told Hastings to correct the paper’s editorial drift, and that it was Hastings who sacked Grove. But some Telegraph employees suspected that Grove’s firing was the work of the invisible hand of Amiel, who gives no ground on her conservative views. “Things started to go sour after he married Barbara,” said one former Telegraph employee. ‘We suddenly started to get phone calls in the middle of the night from Black, complaining that there was too much political correctness in the paper.”

Black’s eyes narrow when asked whether Amiel steers his guidance of the Telegraph. “I was aware that there was a myth that had floated around—though I thought it had died by now—that my wife was exercising some Mephistophelian influence on my relations with the editor,” he says. “I can assure you none of that is true.” He is not about to let Amiel be cast as his Yoko Ono.

But parts of English society revel in repeating stories—true or exaggerated—about Black and Amiel, the uncouth colonials loose in London. They tell of a time when Black and Amiel rushed to fill empty seats in the second row at a Sir Georg Solti concert so that they would be positioned directly behind the Royal Family. Or of a time that a long-winded Black lectured then-Prime Minister Margaret Thatcher at a 10 Downing Street reception on the history behind trooping the color, while she impatiently repeated: “I know, Conrad.” “The key to any large city with a complicated social structure is not to get too identified with any one group, or else you get associated with a disagreeable amount of gossip,” says Black with a sigh. But Black is far more comfortable in London society than Murdoch. “Black has a strong connection with the English and has been easily accepted,” says respected journalist Hugo Young, who is also chairman of the Scott Trust, which funds The Guardian newspaper. “Murdoch despises and detests the English. He has an image of England as a tired, old anti-meritocracy.”

Black and Amiel drift between social sets, from cultural leaders like Sir David Frost, to financial buccaneers, to the Royal Family. (It was the discreet support of the Queen and the Queen Mother, after some cajoling by Black, that cleared the way for the striking Canada War Memorial to be erected in Green Park, across from Buckingham Palace. Government bureaucrats had opposed placing the granite memorial to the one million Canadians who fought for Britain in two world wars in one of the royal parks in the centre of London.) The couple are particularly close friends with a crowd of what might be termed renegade right-wingers, which includes wealthy businessman Sir James Goldsmith, a leading crusader against European integration. “I don’t agree with most of what Goldsmith says on that subject, I’m a free trader,” smiles Black, although he worries that closer European union will bring the continent’s socialist tendencies to Britain. “Some of Jimmy’s ideas are damn humorous but they are not for real.”

Still, Amiel hosted a much-discussed party at London’s Ritz Hotel when Goldsmith was elected to the European Parliament in

May. (Goldsmith’s approach to dismantling the European federation is the same as Lucien Bouchard’s approach to Canadian federalism: destabilize from within.) The party’s guest list was an impressive array of London’s elite, including Princess Diana. “Black and Amiel have a high social cachet,” says a breathless Ewa Lewis, social editor of the glossy Tatler magazine. “Amiel makes him more known.

She’s glamorous and bright. Before they married, he was just a chunky newspaper proprietor.”

Lewis adds: “They are power and glamor. They are not perceived of as Canadians at all.”

It is hard not to get the impression that life in Britain has lost some of its sparkle for Conrad Black. Even before the price war blew up, he was focusing on the American end of his business. The Daily Telegraph may still be Hollinger’s flagship, but the American publishing arm is now more profitable than the British side, he says. Perhaps it is the spectre of a Labour government that is souring him on the United Kingdom. “The United States is a more commercially and politically reliable country than Britain,” he says. “I like it here in London and I’m well received here, but I am not one of those people who aspires to become English.”

He dismisses the trials of the last two months with a wave and a casual acknowledgment that he has endured worse in his business career. “If I have to, I’ll take the Telegraph private again once the dust settles and I can be certain that there won’t be a public relations problem,” he says. But Murdoch has thrown a twist into Black’s careful plans. The Telegraph, his bastion, the spiritual heart of his empire, is under attack by a man who, in Black’s assessment, “loves the high wire.” He is sober at the thought.

Then he brightens as he starts to run through his options, listing the many weapons still available to him. “We would have to be unprecedentedly inept to lose this,” Black finally concludes. The Times, he argues, must be 10 pence cheaper in order to steal readers from the Telegraph. ‘Watch,” he says with a wink as he ushers a visitor past the oil paintings of naval battles on his office walls to the outer door. “I could drop my price to 25 pence tomorrow and then we’d really wax Rupert.” He chuckles at the thought, and is still smiling as he turns and shuffles back down

the hall towards his office. □