November 9, 1989
The Publishing Revolution: A View from the Inside
Thank you, Walter.
Ladies and gentlemen, it's a pleasure and an honor to be here tonight. It's a pleasure because last year I enjoyed hearing from Tom Wolfe in this forum. As you know, his marvelous novel "Bonfire of the. Vanities” features a New York tabloid newspaper run by a ruthless foreign publisher so I guess under the fairness doctrine the Manhattan Institute is giving me equal time!
It's an honor because I have the greatest respect for Walter Wriston. The last couple of decades have been difficult in many ways. A lot of businessmen have said a lot of foolish things. But Walter has consistently taken the long view and the wise view. And not the least evidence of this is his sponsorship of this forum, and his work with the Manhattan Institute, which is trying very courageously to shed new light on some of the intractable problems of our time.
My topic tonight is "The Publishing Revolution: A View from the Inside." I'd like to begin by telling you a story, a true story about a very real revolution that I very much viewed from the inside: The revolution that brought computers and a modicum of efficiency to the British newspaper industry.
We at News Corporation actually only began the revolution in 1986 by defying the unions and moving our operations out of Fleet Street to a new plant at Wapping, in London's Dockland. It was promptly rechristened "Fortress Wapping" because it was quite literally under siege from pickets for the next 13 months until they capitulated.
I want to talk about the story of Wapping partly because I like talking about it, but also because Wapping is a microcosm of the issues that face us now. It puts them all in a nutshell.
Incredibly, as little as four years ago, British papers were still being printed with hot lead that is, they were using a process that had changeed only by degrees since Cutenbergs's day. The new computer technology was in operation throughout the world, but the British labor unions had completely prevented its introduction on Fleet Street. They had a noose round the neck of the industry. And they had pulled it very tight.
The columnist Bernard Levin once described Fleet Street papers as being "produced in conditions which combined a protection racket with a lunatic asylum." This was no more than the truth. At that time in News Corp. we were able to operate a printing press with three paper reels running with four men in San Antonio, Texas. In Chicago, a maximum of five. In New York and Sydney six. And in London, eighteen. And all were paid salaries at least 100% above the national average.
Not that eighteen men could get near a printing press at once. But they weren’t expected to. They were paid full time for working half-shifts, sometimes only on alternate days, occasionally only once every three weeks.
Many of them, for example, 90% of the News of the World publishing department, had other jobs. Some worked for rival publications, some were cab drivers or car mechanics, one owned a vineyard, another was a mortician.
Some didn't even exist. We had R. Rogers, M. Mouse and D. Duck on our payroll all names used to dodge, income tax.
Naturally, they were not eager to retire. A printer of 80 once wanted us to let his union representative collect his pay packet because he couldn't make it up the stairs to the pay office.
And they were not eager to work. Once we found that the phone calls to the Sun weren't being answered because the switchboard team were watching Wimbledon on television. When asked to stop or at least turn the sound down they threatened "industrial action." One night, a big news story broke in the U.S. but failed to reach the Sun press room because our Telex operator was asleep, surrounded by yards of copy churning out of the machine. We complained but eventually had to apologize for disturbing him.
Well naturally we got pretty tired of this. I suppose our competitors did too. But they stayed with it and grew cynical, whereas I came to live in New York and was able to keep the whole mess in proper perspective.
Over here, I am always described as the publisher of the newspapers that I suppose might best be called "popular". At least they're popular with their readers. I'm not complaining about this I'm a journalist and I know the usefullness of a good stereotype.
But the fact is that in London, News Corp. publishes what is far and away the dominant quality newspaper--the Sunday Times; also what some people think of—I’d better say this guardedly now that I'm a New Yorker--the most distinguished paper in the English language, the London Times.
Originally, we thought The Times and The Sunday Times might be the key to our problem. We knew they had the reader loyalty to withstand a strike in fact they were closed by a strike for nearly a whole year in the late 1970's. The then owners, the Thomson family, paid the journalists their salaries throughout that time only to have them go on strike within two months of the printers resuming work.
That turned Ken Thomson off Fleet Street forever. He went back to Canada and sold the papers to me.
But actually what began the Battle of Wapping was our attempt to start a plant to provide excess capacity for the Sun. The unions played the usual games, for example, I remember three of them were insisting that we should pay three men, one from each union, to supervise the button to stop a press in an emergency, a function that the new automatic system performed for itself. So we brought in computers from New Hampshire, printers from Australia and truckers from outside London, and secretly began building a system to print and distribute all of our papers from that one site--that
is to say, more than 35 million newspapers a week.
This was what you might call "betting the company". The Fleet Street unions had not lost a fight in living memory. But it was a matter of life and death for us. And we were encouraged by Mrs. Thatcher's victory in the miners' strike and signs that the authorities were moving against secondary boycotts and were prepared to protect private property from the actions of massed pickets.
I don't mean that the London Police were on our side. They even threatened to arrest the editor of the Sun for making an impolite gesture at the pickets one morning. But they wouldn't let those pickets block our trucks. An appalling number of officers were injured. At one point 300 mounted police, half the number involved in the Charge of the Light Brigade and 1,200 men on foot had to face 11,000 demonstrators. That night 162 police and 33 demonstrators were injured, many of them hospitalized.
But the trucks rolled. And that was in the end decisive.
The immediate result was all sorts of flexibility and freedom for our editors, as well as a great increase in our profitability. But the Battle of Wapping had much broader consequences. Apart from being the first major successful fight by any private sector company with the British unions in decades, it has been the cause of what I don't think it's any exaggeration to say, is turning out to be the Silver Age of British newspaper journalism.
When we broke through to economic rationality at News Corporation, we snapped the noose around the neck of the entire industry. Every management was able to go to the unions and demand that they see sense or else face bankruptcy competing with the dreaded Murdoch. The result is that today just about every newspaper in Britain is either breaking even or very profitable indeed. And, consequently, all are able to pay their creative people very much higher salaries.
Furthermore, it suddenly became a lot cheaper to start a newspaper--in economists' language, we facilitated ease of entry into the business. And the result since 1986 has been a sprouting of completely new newspapers in Britain. And it's not stopped yet: This winter alone, two new quality national Sunday papers are being launched.
One of the new daily papers is a particularly significant case. There is in Britain an important group of people who are socially upscale by any measure, in terms of education and income and so on, and yet they are politically to the left of others at that social level. They're not radicals but they are liberals. In Britain they're sometimes called "herbivores". In New York, of course, everyone regardless of political complexion is a carnivore. But you'll all know the type of people I mean.
Now, the herbivores complained that they couldn't find a paper that reflected their views.
And they were probably right. So, after Wapping, they started one, The Independent.
It's been a notable and deserved success I report with mixed feelings, because it competes with us in every way. But the point is that it couldn't have happened without Wapping.
So sometimes I think the herbivores should be very grateful to me, although none of them have actually said so.
As it happens, the case of The Independent is directly relevant to another commotion I've subsequently become involved in: British Television. As you know, the British have restricted their television for years to four channels run by a tightly controlled duopoly, the BBC and a consortium of private but much regulated broadcasters.
I and some others are arguing that television should be opened to competition, not to destroy public broadcasting, but to add market broadcasting to it, and my company has actually begun SLT-Television, with four channels receivable via satellite dishes, a completely new development in Britain.
Our critics say that this would mean "Tabloid Television", which (needless to say) they associate with me: Countless stories have been published of the horrors not just of American but also of Italian and French television. For instance, the Daily Telegraph loves to write about the French game show where you must take off a garment for every question you fail. They were even at it again today. The clear reference is that Sky Television is about to corrupt the poor British public who must be protected from this rubbish.
But regardless of whether this is fair or not, their criticism is a misunderstanding of the consequences of the broadcasting freedom.
Now of course I'm not going to claim that we fought the Battle of Wapping because we wanted to bring a silver age to British journalism. When the beaver gnaws down a tree, he isn't thinking of his vital ecological role either. But nevertheless he has one. And I think we have one too, which being hopefully brighter than the beaver .I can actually describe: We destroy monopolies. We destroy monopolies because we hope to make money for ourselves, but we enjoy it because it has clear social benefits as well.
I've said that Wapping is a microcosm, that the issues we’ll be facing in the 21st century can all be observed in miniature in that story. But let me pause to compare the situation in Britain with that in the U.S., specifically in New York City. As you know, this has been a subject very close to my heart or at least to my wallet.
We lost about 100 million dollars in 10 years publishing the New York Post and I was perfectly prepared to carry on when Senator Kennedy kindly relieved me of the burden by arranging legislation that forbade reconsideration of cross-ownership of the Post and WNY-TV. This legislation was subsequently found unconstitutional, but not before we'd sold the Post to Mr. Kalikow.
Now that Fleet Street has been cleaned up, I'd say that New York City newspaper unions can proudly claim first place as the most difficult and intractable in the world. Unlike the British unions they're not exactly a noose around the industry's neck. They are too fragmented, and at least one since the disastrous strike of 1972 has had a calculated policy of allowing its members to be bought out of their lifetime contracts. Instead, the New York unions are like thumbscrews and other instruments of torture attached to various parts of the publisher's person. Perhaps the most painful involves not the actual production of the paper, but anything to do with its distribution.
You don't have quite the comic details in New York that existed in Fleet Street. But there is what I might describe as anthropological interest. For example, when I arrived here I found that the paper handlers union is heavily composed of Irish families all tracing their recent ancestry to county Kerry.
If a union member retires or dies, within days the union produces a young replacement fresh from Ireland. I don't know how they get the visas, but they do. It's all quite charming except that they're being paid $1000 a week to do a job that could be easily mechanized.
There are also some less charming things about the New York labor scene that I've never seen anywhere else. Perhaps I can convey what I mean anecdotally: About a year before we sold the Post, one of our drivers had an altercation with a colleague and stabbed him several times right in our delivery dock. Soon after the ambulance left taking the injured man to the hospital, a big car drew up, a man got out, shot the first driver in the head, got back in the car, and disappeared. Everyone claimed to have seen nothing and noone was ever charged. Both men were what they call "connected".
Another less charming feature of the New York labor scene is the unions' extraordinary power in local politics. Let me put it bluntly: I am confident that the police in New York would not protect paper trucks from violence in the way the police in London did.
Now let me return to the Battle of Wapping. What are the morals to be drawn? I think the way to look at it is this: On the one hand, we have technological change, in this case the automation of the newspaper production. On the other, we have the framework of social institutions, in this case labor unions and labor law.
Technological change and social institutions interact continuously. But which one prevails is entirely problematical. Society can soar, or it can stall. It's up to us. Sometimes technology dominates and sometimes it doesn't. I'm not speaking Norwegian here tonight because when the Vikings tried to settle in North America, they didn't have the guns to deter the enraged inhabitants. But several centuries later, the Pilgrim Fathers did.
At other times, though, institutions can repress technological change. The classic example of this is the economic revolution that almost but not quite occurred in the low countries of Europe in the Thirteenth Century. There was a remarkable upswing of economic activity there, which in many ways presaged the Industrial Revolution in for example the organization of factories. But the legal structure at the time was totally inappropriate. Property rights weren't protected. So the economic upswing stalled and then dissipated. Then the Black Death came along and that was that.
What happened in Wapping was that technological change undermined the old ways of doing things but the institutions were sufficiently rigid to resist for a long time. When they broke, they broke in a spectacular way. But we can’t always rely on that happening.
So the global question is: How big are the technological changes we face and are our institutions sufficiently flexible to permit and promote change, and allow us to profit from them.
Well, how big are these technological changes? I'd say that they're getting close to the changes we saw in the period from 1890 to the 1920's. These were in some ways the most remarkable decades in human history, because the telephone, the automobile, the airplane, the radio, the cinema represented change that was not just a matter of degree but of kind. Today all we know is that the pace of change is quickening. The possibilities are mind-boggling. People come to see me seemingly every day with new developments, and my mind is in a state of almost permanent boggle.
We are surely in the early stages of the electronification of all communications. The next steps clearly take us to personalized, interactive communications and even entertainment. For instance, we've all adapted to the new technology to the extent that we've rented videos.
Well, that may be just a transitional stage. Within the next 20 years, the video store will go the way of the pianist at silent films. Early in the next century, if you want to see any of the great films or operas or stage performances of the last 50 years you will simply dial a number on your telephone and it will be zapped to you as a digitally compressed message within five minutes on to a self-destructing disc in your television set.
Armed with a television screen and a keyboard, you can already trade currencies 24 hours a day around the world. Children--and adults!-- will be playing intelligent games across national boundaries. The interactive element will give new intensity and scope to all communications. The television set of the future will look the same as today. But it will contain a powerful computer, as well as cable and telephone connections.
It will know what we like and even offer recommendations. It will be able to monitor and condense news according to our individual interests. It will offer us the opportunity to pick which camera angle we want to watch a football game through. And, it will be able to strip out intrusive advertising which is really going to change the way Madison Avenue does things. Maybe we will just signal if we see a product we want and a window on the screen will flash details of price and availability.
Now, it's far too early to predict the death of newspapers from the twin challenge of the moving image and the fax machine. But I must admit we are already seeing an undeniable fall off in the readership of daily newspapers in advanced Western societies.
The essence of technological change is that its course is unpredictable. All kinds of developments are possible, but whether they find a place in our lives is another matter. The classic recent example of that is the fax machine. Many experts saw no place for it because they thought computer-to-computer communication was more efficient. And the puzzling thing is, they were right. It is more efficient but it's apparently not as effective, at least given how we're organized at this moment.
Similarly, when Thomas Edison invented the phonograph record, he thought it would be sent through the mail to replace written letters. The history of technology is laced with such stories. Now I am used to unpredictability perhaps because of a lifetime of dealing with journalists. At the moment, for example, we have launched 4 Sky television channels in Britain although we simply don't know which mode of delivery, cable or satellite, will ultimately prevail. We just intend to adapt quickly.
But institutions, above all governments, can't adapt quickly. And, not unreasonably, they can't take into account developments as yet undreamed of. This is why government policy is so dangerous in this field.
The technological changes I've mentioned are already having profound influences on our world. Think, for example, about the enormous financial earthquake that was the OPEC oil price hike in the 1970s. There's an excellent chapter about this in Walter Wriston's book Risk and Other Four Letter Words. As Walter says, "There was no historical precedent for such a massive transfer of financial assets, and the majority of commentators, including most of the "experts" were pessimistic about the future of the world monetary system". Well, in fact, the world adjusted. And a major part of that adjustment was due to floating exchange rates, which as Walter says, "permit the system to bend without breaking."
And, of course, because exchange rates do respond so quickly and powerfully, they in effect pass judgment on national government policy. This is what Walter calls "the information standard" just as certain as the gold standard, but not as rigid. As a result, this era of the "information standard," now almost twenty years old, has seen an enormous expansion of world trade to the benefit of many societies.
But all this depends on floating rates working smoothly, swiftly and on a massive scale. And that simply wouldn't have been possible if we hadn't had the basic technological capacity to conduct, instantaneous 24-hour trading around the globe, and to transmit the news which, if you will, is the raw material for this "information standard".
Or just look at another, and even bigger, earthquake that seems now to be underway. By now everyone recognizes that something extraordinary is going on in the Soviet Empire. If we're lucky, it could lead to peace in our time. If we're unlucky, Tiananman Square could be just a rehearsal. Lech Walesa, the leader of Poland's Solidarity, thinks we're going to be lucky. In fact, he thinks luck had nothing to do with it. Last Saturday, the London Times I'm proud to say published an extraordinary interview with him, in which he said this:
"The higher the technology, the higher the freedom. Technology enforces certain solutions: satellite dishes, computers, videos, international telephone lines force pluralism and freedom onto a society.
"Today, Stalin is impossible. Now, you say, what about China? In China, the economic reforms went too fast compared to the political ones. But in any case the future monuments in China will be to those who have been shot China will come back to pluralism, democracy and freedom."
"They won't be able to destroy all our television sets. People can't do without telephones. Of course technological history cannot be turned back, that's why I'm so certain about the victory."
Ladies and gentlemen, Walesa isn't saying this at an after-dinner speech in New York: he's in the bear's den, his life is on the line. We all have to hope indeed, pray that he's right.
I think it's also possible that technology may bring some political change here too. It has now been wellestablished, for example, by Professor Stanley Rothman of Smith College in the so-called Rothman-Lichter study, that the American media elite is a fairly tightly-knit group that is significantly further to the left than the overall population.
Now, I don't want anyone to think I'm complaining about this. After all, I bought the Village Voice for $8 million and sold it for $58 million. But in television, the increase in the number of channels that's coming will allow a much wider range of voices on the air, although that certainly isn't evident yet.
Of course, these voices may be even further to the left! But looking at the political marketplace I would expect a generally wider diversity of views. I'm pretty sure, additionally, that some of them will belong to minority groups without the Federal Communications Commission having to require it. Now I'd like to say a few words, cautious words, about one current controversy that exemplifies this interaction between social institutions, notably government regulation, and technology.
At the moment, cable television in the U.S. is a patchwork of what are in effect regulated local monopolies. Now, they want to buy into the programming end of the business. Conversely, the programmers want the cable companies to carry their product without strings. Let me declare my interest here: News Corp. owns a major program producer, Twentieth Century Fox.
But observe that this situation has come about because of social institutions, not technology. The cable companies are said to have market power because they are local monopolies. But cable is not what economists call a "natural monopoly." There are cases where cable companies compete in the same city. Generally, however, monopoly is forced upon the industry by local governments who grant franchises.
In fact, you could make an argument that cable would never have become so widespread if Federal regulators hadn't restricted the number of over-the-air channels.
Typically the demand for more channels wasn't suppressed but diverted, into a new technology.
Various solutions are proposed to the current conflict. Some people want the cable companies to be forced to act as common carriers. Others think the telephone companies, who already have their cities wired, should be allowed to compete. Still others think that the local monopolies should be abolished and anyone at all be allowed to build a competing cable system. And finally others think that technology is going to undermine the current situation anyway, as satellite and microwave transmissions become steadily more feasible.
One thing that's lost in all this controversy is the fact that the original rationale for regulation, the fact that only a limited number of broadcasters could use their airwaves at once, has vanished. Today, not only do cable companies offer increasing number of channels, but technological development is increasing the number of channels available over the air. We could easily get 20 or 30 over the air, 100 to 200 with fiber optic cable and hundreds more with satellite dishes.
So isn't it time to apply the First Amendment to electronic as well as print media? Nobody regulates the New York Times, and there's no fairness doctrine penalizing it for speaking out by requiring it to subsidize the expression of contrary points of view.
Now let me step back a moment and put all this in perspective.
The Nobel Prize winning economist Fredrich von Hayek, has argued that the human race was formed psychologically during the eons it spent wandering about in what anthropologists call "hunter-gatherer" bands, barely out of the cave. All important contacts were face-to-face. By comparison, the time we’ve spent in cities is only a twinkling of evolutionary time. So we find difficulty in adapting to the impersonal relationships and mechanisms that develop in urban society.
For example, we all know in theory that rent controls choke off the supply for new rental housing and eventually cause a housing crisis. But in practice New York can't shake off rent controls. And Hayek argues that the impetus for collectivism, for regulation and socialism, is fundamentally this atavistic impulse in human psychology, this instinctive reversion to a simpler past.
So the decision to rely on market forces is the essence of modernization. You only find it in highly-evolved societies, and even there it's a fragile late-season blossom, easily dashed by war or crisis. Look at the problems Mrs. Thatcher has faced in the last two weeks!
Now, one of the problems with technological change is that it can appear to threaten exactly the sort of crisis that provokes an atavistic, authoritarian response.
This is a real danger in the present revolution. We might be panicked by future shock into one of the inappropriate and regressive schemes of regulation that are always lurking about. But whatever happens here, the fact remains that the U.S. is in better shape that any other country in the World.
It handled the future shock of the early twentieth century without going to the extremes of government ownership and control that we see in Europe and elsewhere. It's already further along the road to freedom.
One example of this is American Television. Recently I was Invited to deliver the McTaggart Lecture to the Edinburgh International Television Festival. The whole of the British Television Establishment was there. And I took great pleasure in pointing out that American television, which although regulated is far freer and more diverse than the part-government owned duopoly they have over there, has actually resulted In much higher quality programming than in Britain.
They found this very shocking because it doesn't fit their rather snobbish view of America. And some of you may find it shocking too partly because Americans are very self critical, and partly because the British imports we see over here are a very select sample of what appears on British TV.
But a lot of British television is not high quality. I don't know how many of you would want to watch the 350 to 400 hours a year of snooker or pool as we call it here. I understand it gets hypnotic after awhile or the 60 70 hours of darts. But I doubt that you'd like being compelled by force of law to pay $110 annual license fee on your television to finance the BBC.
Now of course, the reason the British television establishment is so touchy about this is that the British viewers show enormous enthusiasm for American TV--when they get the chance. That's why the BBC itself runs "Dallas" in prime time.
And it's why the European Community has just issued a directive, laughingly called "Television Without Frontiers," which enforces what is in effect a quota that limits the ability of member states to show imported programming.
Today, technology is driving the Europeans toward more channels and diversity of opinion. But America, as I say is already on the way down it. In fact, if you look at almost any of the features of the modern world, the things dissidents in the iron Curtain countries are trying to move toward, free movement, free speech, free elections, free markets, these are all things that the U.S. has had, more or less, for over two hundred years.
And this leads us to a great truth, which being an Immigrant perhaps I can see more objectively: modernization is Amercanization. It is the American way of organizing society that is prevailing in the world.
The U.S. has been extremely lucky in its continental size, its natural resources, its hard-working population, its diversity. But the ultimate American resource is more intangible. The Economist magazine put it very well last year, in a long survey of Japan.
It said: "Many Japanese think that the gap in economic performance between their country and America will continue to widen for a while but will then narrow, as Japan's natural disadvantages (especially its aging population) and America's inherent advantages (the suppleness of its society, its inventiveness, its ability to attract the best people from all over the globe) reassert themselves."
The Economist concluded by quoting an aide to former Japanese Prime Minister Nakasone: "The 20th Century was the American Century. The 21st Century will be the American Century.”
And I think he was right. Whatever the human race is going to achieve, will probably be achieved here first. And this will continue as American institutions remain supple which means that American policy makers have to respect open communications.
Perhaps, I could end on a personal note. In the eighteenth century, Voltaire said that every man had two countries: his own and France. In the twentieth century, that has come to be true of the U.S. And it is particularly true for the English-speaking world. Language is the fundamental determinant of culture. All of the English-speaking nations are in some sense members one of another, to borrow language the Bible uses somewhere.
I exemplify this in my own family. My mother now 80, is an Australian. One of my daughters lives in Britain. My other daughter will soon graduate from Vassar. And of course my wife and I are American citizens and we live in New York with our boys.
Now obviously I don't think American institutions should be made more supple just to make life easier for the Murdoch family. But I do want to say, with more feelings than usual, the traditional words when closing a speech, ladies and gentlemen, thank you very much.