4. The Newsroom

RICH ZANNINO TOOK on his CEO job Wednesday, February 1, 2006. Before he could get to running the business of Dow Jones, he had to first face the newsroom. Paul Steiger was nearing his retirement age. He would be sixty-five in 2007, and Journal editors had been jockeying to be his successor for years. Zannino knew enough about the paper to understand that more than any other position at the company, the managing editor of the Wall Street Journal was perhaps the most public position besides his own. "I know what will happen if we screw up the Journal," he told the paper the day of his job announcement.

But Zannino had never banged out a story on deadline in the staid and sterile Journal newsroom, whose walls appeared ashy under the glaring fluorescent lights that highlighted the mild stains in the industrial blue carpet. There, the journalists, who sat in neatly divided cubicles, many littered with stacks of notebooks and newspapers, talked quietly into their telephones, whispering comforting words to sources who might unload a detail or two to make the reporter's story stand out from the rest. Zannino called himself "a devoted longtime user of the company's products," but even that statement, referring to the Wall Street Journal as something akin to after-shave, didn't endear him to the newsroom. The journalists mistrusted him, and he returned the feeling.

Though the Dow Jones offices had been spruced up after the devastation of September 11, the newsroom seemed threadbare. The windows had been replaced and the building thoroughly cleaned to remove the white dust and debris that covered the headquarters following the attacks, but the building, which sat in a nondescript collection of office towers in the always removed Battery Park City development, attracted little affection from its inhabitants. In the four-plus years since the World Trade Center towers fell, the journalists had trudged past the dust and paralysis of the giant hole of a construction site that was the monument to the attacks. Zannino, who took a car to work, as had Kann and House before him, was largely spared the grimy spectacle.

By the time Zannino was named CEO, the newsroom had taken on the quality of Spartan neglect. The low-ceilinged conference rooms contained nonworking speakerphones, the paint was chipping, pieces of cubicle dividers lay detached on the floor. On the executive eleventh floor, sandwiched between the three newsroom floors on levels nine, ten, and twelve, however, the walls were lined with wood paneling and the carpets were a plush beige. Sharing those civilized corridors was the editorial staff of the Journal, a signal perhaps that the conservative bent of those writers made them safer office companions than what executives viewed as disaffected news types.

 

The disrepair of the news floors was indicative of the slow deterioration that had begun years before, as the pretenders to Steiger's throne had tired of their place in his court and left. Years before his retirement, Steiger's deputies had begun auditioning to replace him. Their stage was often the daily morning news meeting, which took place every weekday at 10:30 a.m., when the top editors of the most influential business paper in the world gathered together in a conference room overlooking the Statue of Liberty.

Steiger, an understated and affable manager, quick to laugh and slow to anger, was facing a looming deadline. He and Peter Kann, Dow Jones's chairman and chief executive, had acknowledged years earlier they would retire together. The board had cut short Kann's CEO tenure. With Steiger's own retirement approaching, the meet ing became a regularly choreographed exercise of preening and intellectual one-upmanship for the paper's top editors. Beneath the civility, it was a roiling cauldron of office politics.

Following the Journal's tradition, the editors wouldn't talk about the biggest news of the day. Unlike every other newspaper in every jurisdiction of every country in the world, the Wall Street Journal didn't put news on its front page. The paper relegated the biggest news stories to the inside of the paper, on page A3. Epic features and investigations for Page One were mapped out weeks if not months in advance. Because of this Journal peculiarity, the morning news meeting was not a frenetic debate about the most disastrous or dramatic news events, but rather a mannered recitation of the day's "sked" of stories. In a business of attention-grabbing headlines and color photos, the paper treated its front page like a quiet haven for reflective storytelling. Breaking news was important, and the paper did plenty of it, but the craft of feature writing was the center of the paper's identity. Such a tempo left plenty of time for the auditions.

Bureau chiefs, news editors, and page editors would file into the conference room or log on to the conference call. Steiger supervised this discussion. He would indulge his entourage and listen patiently to the story lineup. Mid- and lower-level editors hoped to be noticed for their clear-sighted news judgment or a lucid explanation of an arcane story. The less ambitious kept their heads down and hoped not to be put on the spot. The participants were well aware of the importance of their decisions: they were helping shape the agenda for the nation's business paper, regarded by the country's corporate executives with a combination of admiration and fear. CEOs often asked themselves, "How would this look if it appeared on the front page of the Journal?" The paper held sway simply by existing.

Those gunning for the top job could exhibit how much they deserved to run the most powerful business paper in the world. They tortured their underlings with probing questions. Some of the interrogations were sincere attempts to delve into an important topic; others were merely the kind of showmanship that played well when positioning oneself for advancement. Like any live show, wardrobe played a role: once, a deputy managing editor and candidate for the top job performed a 360-degree turn at Steiger's behest to show off her snazzy suit before taking her seat at the meeting.

In his later years, his detractors in the newsroom whispered, Steiger had started showing interest in the latest celebrity gossip and fashion trends. He was reading Women's Wear Daily magazine and paying attention to the vogue in women's shoes. His editors attributed these attractions to his third wife, Wendy Brandes, a striking young jewelry designer and fashion blogger twenty-five years his junior who looked like a modern-day Snow White with a high-fashion wardrobe and a sleek bob. As his retirement approached, Steiger joked that Brandes had threatened him: "The first day she finds me in the apartment in sweatpants after 10:00 a.m., it's not divorce; it's murder." He hadn't yet determined what he would pursue after retirement, but he didn't plan to be idle.

A year before Steiger's retirement, New York's media world was scattered with the erstwhile candidates: Larry Ingrassia, the former Journal money and investing editor (and brother of Paul Ingrassia, president of Dow Jones Newswires), had left to become the business editor of the New York Times; Steve Adler, the top investigative editor at the Journal, was now the editor in chief of BusinessWeek; Joanne Lipman, the steward of the paper's lifestyle sections, had just left for Condé Nast's new glossy monthly business magazine, Condé Nast Portfolio. Daniel Hertzberg, long Paul Steiger's main deputy in the newsroom, was still at the Journal, but he was too close in age to Steiger to be considered a successor. Of the original pool of Journal candidates to succeed Steiger, only Marcus Brauchli, the youngest of the group at forty-four, remained at the paper.

A journalism enthusiast, Brauchli had spent virtually his entire career at the Journal, minus a requisite year and a half as a copy boy at the New York Times, a stamp for any and all aspiring journalists of a certain generation. He was among the last of that old breed, yet despite his youthful demeanor he affected a world-weariness that made him seem a seasoned member of the club. Slim and good-looking, with a broad nose and a boyish face, he had a hairline that had receded to the point where he had adopted the closely shorn haircut of many middle-aged men hoping to look less aged. His suits, many of which he brought back from his years as a correspondent in China, were bespoke; he bought them from the cut-rate De-Luxe Tailor Shop in Hong Kong.

Brauchli spent twelve years in Asia with Dow Jones and a year and a half in Europe (with a short break for a prestigious Nieman fellowship at Harvard). As a foreign correspondent, he wrote creative, probing stories and seemed to model himself as a swashbuckling reporter much like Peter Kann.

But he occasionally grew frustrated with taking orders from New York; Brauchli wanted to try his hand at delivering the orders. In 1999, he got his chance and was offered the position of national editor at the Journal. Brauchli planned the move back to New York and thought of it as an experiment. As he traveled through Mongolia the summer before he returned, Brauchli promised himself that if he was good at navigating officialdom, and enjoyed it, he'd stay. But if not, he'd be right back out on the road.

He took easily to the series of managerial projects that awaited him upon his return. These propelled him up the ladder of the newsroom so quickly that he became known as "the Rocket." Brauchli just laughed at such monikers and kept moving ahead. Often, however, he would think back wistfully to his years as an Asia correspondent as he suffered (and thrived) through bureaucratic newsroom meetings. Despite these yearnings, he became known to most reporters in the Journal newsroom as a master manipulator of newsroom politics. His roles expanded, and he began to take on more business-oriented projects. In 2005, he helped redesign the paper's small and struggling European and Asian editions, turning them into smaller tabloid formats, which sold better on newsstands in Europe and saved the company money in production costs. By the end of that year, he had started to work on a redesign of the paper's U.S. edition.

When Zannino was appointed CEO, Brauchli saw the move as favorable to his chances at the managing editor slot; he and Zannino had gotten to know each other through Dow Jones's Senior Leadership Team events, meetings for the company's executives to brainstorm about strategy. Brauchli sensed that Zannino liked him.

The redesign of the U.S. paper was gaining momentum just as Zannino took on the CEO role. To save money, Kann and Zannino and House had agreed on one thing: to shrink the size of the Journal by three inches to save on newsprint and production costs. The old size of the paper, an expansive fifteen-inch width, made it unique, but such grandiosity was no longer possible in a world of dramatic budget constraints. The paper would shrink to become a foot wide.

Now, the project was Crovitz and Brauchli's to implement. The Journal, like every other newspaper in the country, was suffering from an identity crisis. Not only was advertising down, but the paper was competing with online news sources and twenty-four-hour cable news. The immediate reason for the redesign was the adoption of a narrower-size paper that would allow the Journal to be printed on presses across the country that weren't owned by Dow Jones. The move would save $18 million a year. Crovitz refused to blame the change on the tough times. Instead, in an Orwellian twist, he would take this literal shrinking of the paper and sell it to readers as a sign of a strong future.

Crovitz decided he would call the new iteration of the newspaper "Journal 3.0." He arrived at the name—never popular in the Journal's newsroom or executive floor—by taking particular note of the Journal's lead front-page story the day after Japan attacked Pearl Harbor: "War with Japan Means Industrial Revolution in the United States" read the headline. The story outlined the implications of the attack on the country's economy, industry, and financial markets. For Crovitz, it also marked the end of the first phase of the Journal—"Journal 1.0," the time between the paper's founding in 1889 and December 5, 1941. During that period, the Journal reported the news like any other outlet. After that headline and under Bernard Kilgore, who became the paper's managing editor the year of the Pearl Harbor attack, the Journal started adding more analysis to its stories and expanded its coverage beyond business and finance. Crovitz defined "Journal 2.0" as starting on December 8, 1941. He planned for it to end on December 31, 2006, when he would usher in the paper's third phase. To compete against the immediacy of the Web, Crovitz wanted the paper, instead of running stories that rehashed what people had learned the day before on their BlackBerrys, to become more analytical. Journal reporters would break news on the Web site and then examine it in the next day's paper.

Though Brauchli appeared largely unchallenged inside the Journal newsroom, another candidate from another Dow Jones division, Paul Ingrassia, was a leading contender for the managing editor post. Ingrassia, who had served as the Journal's Detroit bureau chief in the 1990s, had won a Pulitzer Prize in 1993 for his coverage of the automobile industry. For the past ten years, however, since 1996, he had served as president of the company's storied "ticker," which was one of Dow Jones's largest and most profitable divisions, and one that Journal reporters had always dismissed as a journalistic stepchild. Newswires wrote bare-bones stories for investors. They had no pretensions to craft a gripping narrative; their job was to report on the corporate news of the moment, updating the investors who subscribed to their service. Newswires reporters were judged on how many seconds their stories appeared before competitors' at rival newswire services Reuters and Bloomberg. During Ingrassia's tenure as the head of Newswires, he had maintained its profitability and built up its journalistic credibility, though the division still lagged in reputation behind Reuters and the ever dominant Bloomberg. Still, Ingrassia had done good work. The ticker hadn't won a single award for its journalism in the 115 years prior to Ingrassia's arrival but then accumulated thirty during his time in the job. The position gave him what Crovitz called "management maturity."

Ingrassia had been talking to Crovitz about a strategy for all of Dow Jones & Company, one that included gradually merging the reporting bureaus of the Journal and Newswires. It was, in some ways, an obvious step. The wire had a huge reporting staff of 700; the Journal, 250. On any given day, the two newsrooms often covered the same story, be it an earnings release from a company or the market's movements for the day. The newspaper industry was facing an increasingly demanding shareholder base. Given the mounting financial pressures on the business, it only made sense for the two units to coordinate. But such a combination was anathema to the proud staff of the Wall Street Journal, where many reporters saw themselves as storytellers with a powerful audience, not stenographers for the broker set. Indeed, cooperation between the two staffs had been attempted before, never with much success. Each time, after a few months of halfhearted coordination, the two staffs would re treat to their spheres of comfort, where Journal reporters would file their stories on a 5:00 p.m. deadline for the paper, long after it was of much use to the Newswires staff, who had to feed investors during the stock market's open hours between 9:30 a.m. and 4:00 p.m.

Under Zannino and Crovitz, the idea was gaining new momentum yet again. Ingrassia found himself in a horserace with Brauchli, and surprisingly, at least for observers in the Journal newsroom, which backed Brauchli, Ingrassia had the early lead. In fact, one could say he had already won the race in early 2006. In the first few weeks after Zannino officially took over the CEO spot in February, Crovitz had been talking regularly with Ingrassia and assured him "there's no one else" for the job. It was over a year before Steiger would reach retirement age, but Zannino and Crovitz were ready to make a move. They agreed that Ingrassia, with his experience, his attention to the bottom line, and his position somewhat outside the Journal newsroom, was the right choice.

They made that choice without consulting Steiger, a practice that would seem perfectly acceptable in any other company, where typically a sitting executive doesn't pick his successor. But Paul Steiger had been shaping the Wall Street Journal and its journalism for fifteen years as managing editor, encouraging his reporters to dig out "the definitive story" on their beats and pursue stories with "moral force." He had learned to court and when necessary deflect the powerful executives who had been an almost continuous presence on the job, at cocktail parties or editorial lunches, or in an angry telephone call after an unflattering Journal story. The proximity to such power and his comfort with it had lent Steiger an air of gravitas. He showed the subjects of the Journal's stories respect and deference, but he landed careful blows when he had to. Through this measured approach, he had become one of the great newspaper editors in the country.

Under the plan Zannino and Crovitz had in mind, Ingrassia would take over for Steiger, who would, for the last year before his retirement, take on a senior editing role overseeing both Dow Jones Newswires and the Wall Street Journal. It amounted to a proverbial kick upstairs for Steiger. For Zannino and Crovitz, it kept Steiger's name and reputation attached to the Journal, helpful for this brand-new executive team. Steiger's new position atop both the Journal and Newswires would bless the Ingrassia-outlined revolution.

Zannino and Crovitz discussed their choice of managing editor with Dow Jones's directors. Lewis Campbell, the Textron CEO who had worked at General Motors when Ingrassia served as the Journal's Detroit bureau chief, had lobbied for him with fellow board members. Peter Kann personally blessed the pick. A press release was drawn up to announce the move as part of Zannino's other executive appointments. Only then did Zannino and Crovitz approach Paul Steiger with their decision. Crovitz took Steiger to lunch at City Hall restaurant, a Tribeca establishment blocks away from the Journal's offices, to lay out the plan. Steiger listened patiently. But he had something else in mind. He calmly explained that he felt the new scenario would give him no authority. Ingrassia would be designated heir apparent, rendering Steiger a lame duck.

"I've had this job for fifteen years, longer than anyone else," Steiger told Crovitz. "If you think I've had it too long, I'm happy to step out of the way," he added, in the same calm, soft-spoken, and halting tone that neutralized irate CEOs and staved off complaints from embittered editors and reporters. "But if you want me to stay, I want to be the managing editor of the Wall Street Journal."

Crovitz asked Steiger to come talk to him and Zannino together, which he did, and he repeated his arguments. A job that lacked real authority was not a job Steiger wanted. "Why make a decision before you have to?" he said. To rush the selection of managing editor, Steiger reasoned, seemed ill-advised. The editors were busy working on the planned redesign of Journal 3.0. "Why don't you put off the decision until the redesign is complete?" he said. The launch of the new paper was still nearly a year away. When Zannino pressed Steiger, he voiced some reservations about Ingrassia, saying he had been out of the Journal newsroom a long time and didn't have an easy relationship with his former colleagues. But he reserved his harshest criticism for later.

Zannino and Crovitz, brand-new to their jobs, had underestimated a seasoned corporate operator like Paul Steiger. They both respected Steiger and knew they needed him. They were about to learn how little power they wielded within the company. Until Zannino, Dow Jones had been run by journalists. Now, even though there wasn't a reporter in the corner office, the newsroom maintained its sway over the company.

Zannino now had to deal with the veiled threat that if he went ahead with his existing plan, Steiger would leave. He, the non-journalist CEO, the guy who had come from Liz Claiborne, didn't want to be responsible for that. This battle between the Journal and the business side would go to the newsroom. Zannino and Crovitz put off the decision on the managing editor by placing Ingrassia in charge of a "news strategy" committee that would spend the next year exploring ways to get the Journal and Newswires to cooperate. It would give Ingrassia something to do for the year until they made a final decision.

That spring, Zannino was mounting another project as CEO: meet the other chiefs in the media business and take Dow Jones out of its isolation. During his three months in the chief executive's office, Zannino had been making the rounds with his counterparts at other, larger, more dynamic media companies. He was warming to his role. He had gone to breakfast and lunch with media players such as IAC's Barry Diller and Reuters's Tom Glocer, and after a concerted effort by Jimmy Lee, he was going to have dinner with Rupert Murdoch. Jimmy had been trying to get Zannino to attend his annual JPMorgan Leadership Conference earlier that spring in Deer Valley—where Murdoch had been—but Zannino demurred, telling Jimmy the venue was too public for such an introduction.

That Thursday evening of May 18, Jimmy Lee was the first to arrive in the Oak Room at the Links Club on East 62nd Street, where the banker often entertained JPMorgan's most favored CEOs. Tonight he believed his guests could accomplish something quite advantageous for all involved. The dark paneling and the hushed greetings at the club were the perfect atmosphere for Jimmy, though both his guests would find the surroundings staid and stuffy. This was unfortunate, as Jimmy had hoped for a casual effect that signaled ease and a not-too-aggressive approach. He didn't even plan to raise the topic—"the thing," as he often said—that was behind the occasion. To him, bringing up the deal at this point was like going on a first date and talking about when to have children—it was a turnoff.

Rupert Murdoch arrived later than Zannino, as planned. Jimmy didn't want them to be seen entering the building at the same time. The perfect host, Jimmy ushered each man, upon arrival, to the small Oak Room, where they opened a bottle of expensive Australian wine. Jimmy had been busy making the match for months, telling both men they'd really like the other. He saw them both as "guys' guys"—the same way he saw himself.

Murdoch arrived at the dinner facing myriad threats to his kingdom, but he was, as ever, moving forward. John Malone, the cable magnate, had bought up his stake in News Corp. The stake was threatening because it wasn't much smaller than the Murdoch family's own 30 percent share, and Malone was just wily enough and opportunistic enough to never be trusted. The previous summer, Murdoch's elder son, Lachlan, who had been groomed his whole life to take over from his father, had left his post as deputy chief operating officer of News Corporation. Lachlan had suffered from what some called a "corporate conspiracy to undermine him" at the hands of Roger Ailes, the programming genius behind Fox News, and Peter Chernin, the company's chief operating officer. But it was more than just a corporate defeat. The move was a "tragedy" for the family, in the words of one of the kids. The problem was that Lachlan's father had allowed it to happen. Murdoch had prepared Lachlan to be the heir apparent, but when Lachlan started to falter, Murdoch allowed him to fall. "It wasn't the most emotionally intelligent way for Dad to handle it," said Elisabeth, Lachlan's older sister. "He doesn't really have the tools to express that he's sorry."

Lachlan's defection in 2005, unthinkable until it happened, had been hastened by another threat to the old Murdoch family: Murdoch's third wife. Murdoch had long been separated from his second wife, Anna, with whom he had Lachlan, his older sister, Elisabeth, and his younger brother, James. Anna, an elegant woman, knew her husband well. She could almost have anticipated his affair with Wendi, whom Murdoch met on a trip to China in 1997. During the divorce in 1999, Anna's children watched bemusedly as she focused single-mindedly on cementing her children's control over the family trust that gave the Murdochs control of News Corporation. "I told her to stop being so paranoid," one of the children said, as Anna warned them that their father would start a new family and have more children and supplant the existing kids' total control over the trust. "He's not going to have more kids at his age," they said, shrugging off their mother's concerns, the way children often do.

Anna could have walked away with half of Murdoch's empire. The Murdochs were residents of California, and after a thirty-one-year marriage, Anna was likely due half the estate, worth nearly $8 billion at the time. But to blow apart the family, after all the work she had put into it, seemed foolish. She had gotten her children up in the morning early to see their father before he went to work. She had nurtured a feeling of Murdoch loyalty. "Growing up, we moved around a lot, and it always seemed that if everything else went wrong, we still had each other," says Elisabeth of her family. Even if Rupert Murdoch was going to throw that away, Anna wasn't going to let the divorce threaten the dynasty. She took a relatively modest $200 million in exchange for a guarantee of her children's future control of the company.

When the news came that Wendi was pregnant, Anna's wounds were salved just a bit by the knowledge that she saw this coming. When Wendi's second daughter, Chloe, was born less than two years after the first, Anna braced for the next step. It came as she predicted.

When the little girls were just babies, Murdoch strove to assure Wendi that she was truly part of the family and that all his children were equal in his eyes. Murdoch told his older children he needed to split the trust. "We'll split the family if you don't get in line," he said. For months, they haggled over the outline of the trust with their father. It fell to Elisabeth to tell her mother the children's decision to give in to their father's wish to split the trust. The four older children retained voting power but agreed that all the children—Grace and Chloe included—would receive a $150 million distribution from the trust. It was a grueling ordeal, and it seemed, for a time, that the dynasty might falter. (Lachlan left for Australia in the midst of the dispute.) But the grown children stood by their father in the end and made peace, however uneasy, with his new life, and their new siblings. By then, Anna was remarried to a man who finally would take her to the opera and spend afternoons at home. She described her recovery from the divorce as "coming out of a deep mental illness."

 

Zannino had pretended to agree to this dinner reluctantly. He knew Murdoch was interested in Dow Jones and how their meeting might appear if discovered. The early awkward moments of the meeting past, Zannino breathed a sigh of relief. Someone brought up the show American Idol, which aired on Murdoch's Fox network. (Murdoch's daughter Elisabeth had urged him to buy the program years earlier.) Then the talk segued into the price of newsprint. Murdoch knew how to play this part of the game and maneuvered adeptly, seeming neither too eager nor too distant. For his part, Zannino was equally adept. Just over three months into his first CEO job and there he was, already in the shark tank with one of the most determined and skilled dealmakers in media, trying to avoid the subject that brought them together while, at the same time, making an impression. They all knew the purpose of the gathering but it was never mentioned. "To get a big deal done, that's how it works," Jimmy says, recalling the evening. "You don't just invite everybody into a room and say, 'Hey, wanna sell Dow Jones for $60 a share? Yeah, sure!' You need to get to know people, to introduce them." Murdoch left the meeting feeling comfortable that Zannino was different from Kann, in a way that would certainly be advantageous.

Meanwhile, Zannino and Crovitz were trying to contain the disaster brewing in the newsroom. The "news strategy" position they had created for Ingrassia clearly wasn't working. It was an inflated title with very little real responsibility that bought them time before Ingrassia would take a permanent position. Crovitz had presented the interim job to him as a mere delay in the appointment, but the delay threatened to become indefinite. Marcus Brauchli's star was rising, and Ingrassia, with Steiger against him, seemed to retreat. Suddenly rumors coursed through the newsroom that Ingrassia would cut 20 percent of the Journal staff (a claim Ingrassia denied he ever made). Brauchli's allies were vicious about Ingrassia, who believed, despite the barbs, that the job was safely his.