Rupert Murdoch being undone by old-fashioned journalism

Rupert Murdoch, Chief Executive Officer of News Corp., smiles at photographers as he is driven from News International's headquarters on July 13, 2011 in London, England.</p>

Rupert Murdoch, Chief Executive Officer of News Corp., smiles at photographers as he is driven from News International's headquarters on July 13, 2011 in London, England.

LONDON, United Kingdom — In the last few days, terrorists have attacked Mumbai. Ahmed Wali Karzai, the second most powerful man in Afghanistan, and the political linchpin of anti-Taliban strategy in Kandhar — was assassinated. The worst case scenario for global economic recovery — the utter collapse of the Euro — began to unfold as Italy, the third largest economy in the euro zone, came under pressure from bond-markets over the size of its deficit. And if the Euro doesn't kill recovery, the fight over the debt ceiling in Washington might.

But, despite all of that, only one thing has mattered in Britain: the sudden reversal in fortune of Rupert Murdoch's empire.

Not only has a potential source of more than $2.75 billion in profit annually just disappeared from News Corporation's balance sheet, Murdoch's influence over the political process here has completely evaporated. 

The story is far from over as criminal investigations are under way — a former executive editor of the News of the World was arrested today — and a special judicial inquiry is being set up. But since you can't fast forward reality, now is a good time to reflect on what the phone-hacking scandal says about Murdoch, the British public and, most importantly, about why, despite the changes in the practice of journalism brought about by the internet, the old-fashioned way is still the best way.

1. Murdoch is to our times what Andrew Carnegie or John D. Rockefeller were to theirs. This is the information age and News Corporation — the company he built after inheriting a single newspaper in Adelaide, Australia almost 60 years ago — is the largest media company in the world. Murdoch's company provides content, owns the pipelines that deliver it and uses its monopolistic muscle to gain greater market share along the way. It does not hire goons to assert its authority as those earlier industrialists did. The company's original business — journalism — allows it to use something less bloody but equally effective. In Britain, its newspapers, in America, Fox News, absolutely bludgeon political opponents. It doesn't matter who wins an election, the Murdoch press will crush those politicians that seek to regulate it or more generally create limits on what the company sees as its right: to make as much money as it can and pay as little tax on its profits as possible.

We still study Rockefeller's Standard Oil trust and its break up. It is quite possible that what happens to News Corp. will provide a similar subject a century from now for study of a business empire brought down by its own arrogance.

2. In 1992, when Britain was unceremoniously ejected from the European Exchange Rate mechanism and forced to raise interest rates to double digits, then Prime Minister John Major called Kelvin MacKenzie, the editor of Murdoch's tabloid The Sun, to ask how he planned to play the story. Mackenzie famously told Major: "Well John, let me put it this way. I've got a large bucket of shit lying on my desk and tomorrow morning I'm going to pour it all over your head."

A large number of shit buckets have been emptied in recent days. They've been dumped on the heads of senior police officers and politicians from all parties. Not even Prime MInister David Cameron has been spared. His decision to hire the former editor of the News of the World, Andy Coulson, despite being warned about his connection to phone hacking, is something he simply can't get away from.

The one participant in the story who has avoided the excrement dump has been the British public. Indeed, Labour Party leader Ed Miliband praised the public yesterday and said their moral outrage is what really forced Murdoch to abandon his bid for BSkyB. 

But the great British public shouldn't be allowed to go away from this scandal clean. It is their insatiable desire for tittle-tattle, salacious gossip and red-meat nativist political commentary that allowed Murdoch's papers to grow.

If they didn't buy Murdoch's product, he wouldn't have accumulated the power. Before News of the World was shut down last weekend, it sold 2.66 million copies every Sunday. The Sun sells nearly 2.8 million copies every day. Rupert Murdoch is a businessman who gives the public what it wants. In America, that means The Simpsons as well as Fox News. In Britain that means a "newspaper," The Sun, best known for its picture of a topless maiden on page three every day. People lap it up.

American anglophiles who think the people of this country are the descendants of Jane Austen's characters and live life as one long episode of Masterpiece Theatre with occasional visits to an old church for a Royal Wedding should pause and reflect — 7.7. million tabloid newspapers are sold here every single day. Close to 20 million people read the things. That's 40 percent of the adult population. The tabloid editorial mix is basically the same from paper to paper — only the writing style and political allegiance changes. 

It is no secret that the tabloids use checkbooks and subterfuge to get their stories — no one cared when the first phone-hacking reports appeared. It was just celebrities being embarrassed and they could afford their wounded pride. The monopoly issues surrounding the News Corp. bid for BSkyB meant nothing — so long as the programming was good who cared who provided it? 

It was only when the phone-hacking story hit ordinary people: the family of the kidnapped schoolgirl Milly Dowler and victims of the July 7 terrorist bombings that the public became outraged. 

If allegations that Murdoch's British journalists tried to hack the phones of victims of Sept. 11 prove true will the American public be similarly outraged?

3. The saga is the clearest rebuff yet to claims made by a certain type of tenured journalism professor or internet-based press commentator that newspapers are dying and being re-placed by citizen journalists. I said in my first piece when the scandal exploded last week that it had the feeling of the end montage of the film classic "All The President's Men." Revelation piled upon revelation faster than even live-bloggers could keep up with. 

The Guardian newspaper made this story happen in the same way that the Washington Post made Watergate happen. It's editors gave chief crime reporter Nick Davies all the resources he needed. Davies literally spent years digging and developing sources to get to the bottom of phone-hacking. When the story led to the doors of Downing Street, the Guardian's editor, like Ben Bradlee, backed his reporter to the hilt. He is willing to put his paper's reputation on the line against the prime minister's.

Davies first report appeared in 2009. Nothing much happened. The paper told him to keep digging. Davies kept pushing. A year later another story, and some news organizations followed it, including this one. The lever and fulcrum was David Cameron's catastrophic decision to hire Andy Coulson as his communications chief. That put the new prime minister at the heart of the story. In January, Davies' revelations forced Coulson's resignation. More digging followed and then last week, the Milly Dowler revelations and the dam broke.

Only a well-funded, solid journalistic institution like The Guardian could provide the time, space and money for a reporter or a team of reporters to work at a story for years. Managers of newspapers and broadcast journalism outlets are overly fond of consultants like McKinsey and Grant Thornton. It is easy to imagine them saying, "Nick Davies, how many stories did he publish this year? No value for money, you should get rid of him." More than one news manager in the world of journalism has taken that kind of advice in recent years. 

Here is the important point: This is a story about journalism and its unique power — for good and evil Journalism is not like any other business — and it's product cannot be measured by normal business school taught analytics. The main product of journalism is not tittle-tattle and check-book obtained "scoops" about celebrities — as Rupert Murdoch has found to his cost. It is about digging out the facts about how societies are governed, about corruption, about eyewitness accounts of how the world works. Strong institutions — led by editors who are willing to give reporters the time and space — are necessary to fund that work. 

And without their efforts and vigilance then parliaments and congresses and presidents can be cowed by all manner of powerful special interests, especially those whose idea of the journalism business is give the people what they want: tits and ass and a large dose of prejudice.