Murdoch's China dream shattered

Paul Sheehan previews a new book:

FOR more than 10 years, China's potential mesmerised Rupert Murdoch. He poured more than $2 billion into the country and lost at least half of it. He spent lavishly courting the communist mandarins, and cut ethical corners. He even took a young Chinese wife, who bore him two daughters and installed a Mandarin-speaking nanny so they would grow up bicultural.

And where did it all get him? Not far, according to Bruce Dover, who served the Murdoch empire in Asia as director of business development when China was Murdoch's big global play. "He was literally on the telephone every other day seeking news of progress," Dover writes in his book, Rupert's Adventures In China, to be published next week.

Murdoch described Wendi Deng, his third and much younger Chinese wife, as his "great help and adviser", but Dover was unconvinced. He writes: "The degree to which she has been a great help is arguable. While she brought to the partnership an insight into the cultural and often complex nuances of doing business there, she had no head for the politics of the country's opaque and evolving political structure. She had no business connections in China. She teamed up with the new stepson [James Murdoch] to initiate and advocate Chinese internet investments nearly all of which were later written off as total losses."

Nor does James Murdoch, Rupert's apparent favoured heir, who was sent to run News Corp's push into Asia for a time, escape Dover's scepticism. After noting that James was born in the year of the rat, he summarises some of his career achievements before arriving in China: "In late 1999 and early 2000 he spent some $US150 million acquiring stakes in some 20 internet businesses across Asia … Within two years all but a couple had disappeared completely.

"James had also been the champion of News Corp's decision to merge the highly profitable TV Guide business with Gemstar International [an onscreen program guide]. Three years later, News Corp would take a $US6 billion write-down on its investment in Gemstar."

Dover was also unimpressed by the way James courted favour in Beijing after the violent suppression of the spiritual movement Falun Gong: "The crackdown on Falun Gong was orchestrated by the same officials who had once been given the task of monitoring and controlling Rupert Murdoch's entry into China. As his father watched from the audience, James claimed that Falun Gong 'clearly does not have the success of China at heart'."

This and other episodes, including the elder Murdoch's decision to junk a memoir by the former governor of Hong Kong, Chris Patten, because it might offend Beijing, left Dover ready to depart the empire: "The Patten incident marked a distinct warming in the relationship with the propaganda department. On a personal level, it left me questioning for the first time the real cost of accepting the Murdoch dollar and working for News Corp in China. Pragmatism was one thing, but this bordered on the coldly amoral."

It didn't get them far. Again and again, Murdoch is taken for a ride by the Chinese. First, there was Richard Li, the son of the legendary Hong Kong entrepreneur Li Ka-shing, who in 1993, at the age of 23, sold most of STAR TV, a Hong Kong-based satellite service, to News for more than $500 million even as the company was hemorrhaging money.

Li forgot to tell Murdoch that Chinese consumers were pirating the signal. "Despite the tens of thousands of cable operators surreptitiously downloading the STAR TV signal and distributing it across the nation to tens of millions of subscribers," Dover writes, "Murdoch was unable to collect a single cent in return."

The Chinese would also clone the programming News was churning out, copying everything. Soon after the purchase, Murdoch made a monumental blunder during a speech extolling the virtues of satellite TV, when he uttered this fateful sentence: "And satellite broadcasting makes it possible for information-hungry residents of many closed societies to bypass state-controlled television channels."

Within a month, China had banned the distribution, installation and use of satellite reception dishes anywhere in China. Murdoch's access to top officials dried up. It took four years, and hundreds of millions in losses, before he was rehabilitated in Beijing, but the Chinese were far from finished ripping him off. Writes Dover: "Many of [those] who had been provided with all-expenses-paid trips to the UK to see the BSkyB [satellite] platform in operation loved the Murdoch concept and set about implementing it. They just excluded Murdoch from his own plan."

In 2004, desperate to recoup its massive investments, News began expanding into the "grey area" of Chinese broadcasting. "STAR was certainly pushing the boundaries of what seemed to be legally acceptable behaviour," Dover writes. "This was no friendly giant treading delicately through the regulatory fields of the Chinese media landscape. This was the Incredible Hulk on steroids: pumped up by his own self-belief and urged on by his advisers, he was stepping on toes everywhere."

A disgruntled former manager blew the whistle, detailing deception on a large scale, how STAR circumvented regulations, exploited loopholes and disguised subscription payments. On August 2, 2005, the propaganda department issued regulations ending the opening up of the Chinese television market.

"Murdoch's insatiable appetite for the Chinese market," Dover writes, "had led them to push too hard, too fast, too soon - and they had crashed."

Couldn't happen to a nicer bloke, eh?

Meanwhile, forget about Murdoch's much-repeated promise to make online WSJ stories 100% free. In fact, fees are going up 10%:

"We're sort of dividing it up," Mr Murdoch told a panel at the World Economic Forum in Davos on Thursday. "Those things that you can get more or less as a commodity on different sites about finance, that will certainly be free." But the "really special things will still be a subscription service, and sorry to tell you, probably more expensive", he said.

I wonder if the "really special stuff" includes the rightwing propaganda? Probably not, unfortunately.

Meanwhile, I not that Rumsfeld wants a new US Department of Propaganda. Doesn't he know they already have one - it's called FOX News.