Dow Jones seemed destined for Rupert Murdoch long before the official dealing had begun. For decades, Murdoch had coveted the Wall Street Journal. His children couldn't remember a time when he wasn't talking about it. His most trusted colleagues called it a “preoccupation” for him (even more than the Financial Times, which he had tried and failed to buy, or the New York Times, which he also eyed). He was open about his admiration, and among Wall Street's bankers, brokering a deal between the Bancroft family and a deep-pocketed media mogul such as Murdoch was a tantalizing opportunity.
So in the summer of 2002 when James Bainbridge Lee Jr. stood in his dark-wood-paneled office on the executive eighth floor of JPMorgan Chase & Company's midtown Manhattan headquarters, he prepared carefully for his upcoming call. He was contemplating how to break into one of the most difficult-to-crack media families in the country, the Bancrofts of Dow Jones & Company and the Journal.
As Jimmy checked the market movements and news on the five computer screens on his desk, his image stared back at him from the framed Forbes cover on his bookshelf. Under the headline “The New Power on Wall Street,” the photo displayed a slightly younger version of the Wall Street banker in his cufflinks and suspenders, his graying hair slicked back and curling slightly below the ears. The piece invited readers to “Meet the New Michael Milken.” Jimmy, as he was known on Wall Street, could have served as the model for “investment banker” if the Museum of Natural History mounted a diorama of the species, but his thoughts that day were not on his appearance.
Jimmy had made his reputation more than a decade earlier as a young banker making big loans to clients who wanted to make even bigger deals. His Rolodex was the source of his power, and he used it. He was sometimes derided as a glorified matchmaker. Every day, he started a new page on his yellow legal pad, jotting down in his all-caps scrawl a list of names to contact. By evening, after his usual frenetic day of jokes and ingratiating storytelling, the names were crossed off with his thin royal blue marker.
That midsummer day in 2002, he had already scribbled through one page and had moved on to the next when he dialed Richard F. Zannino's number. Zannino had just been named the chief operating officer at Dow Jones & Company, an elevation that put him a single step away from the spot where Jimmy wanted him for the match he had in mind. Dow Jones, while a storied media firm, seemed increasingly small and outpaced alongside entertainment conglomerates such as Viacom Inc., Time Warner Inc., and News Corp. Even pure news outlets such as Bloomberg LP and Reuters PLC now dwarfed the parent of the Wall Street Journal, which had been struggling since the implosion of the Internet bubble in the spring of 2000 had dried up much technology and financial advertising. The Journal was in the process of losing more than $300 million in advertising revenue, and the paper would spend the next three years losing money. The company's stock had peaked near $78 a share in the summer of 2000. Currently it was trading in the low $40s.
That Zannino would pick up the phone at all to chat with a banker like Jimmy represented a change at Dow Jones. Zannino's boss, Dow Jones CEO Peter Kann, would never have thought to befriend someone like Jimmy, much less talk on the phone with him on a summer afternoon. For Kann, even speaking to a rogue banker about company strategy was a step outside the bounds of Bancroft-approved isolationism. Kann, who often spoke slowly, his hand rubbing the top of his balding head, which pitched ever so slightly forward when he addressed a group, had served as the company's CEO since 1991 and was a Wall Street Journal journalist who had risen through the ranks. At another publication, the ascent would seem unusual. But at Dow Jones, the best journalists wound up running the company, and so it had been with Kann. He was awkward in front of crowds; his presence was unassuming until he started to write. Then his prose enchanted, something his performance as an executive had never managed to do. More than any living Bancroft, Peter Kann embodied the understated spirit of Dow Jones. He once wrote in a letter to Journal readers: “We believe facts are facts and that they are ascertainable through honest, open-minded and diligent reporting. We thus believe that truth is attainable by laying fact upon fact, much like the construction of a cathedral. News, in short, is not merely a matter of views. And truth is not merely in the eye of the beholder.” As CEO, he had assembled a management team of polite Ivy League executives. He had also promoted his wife, Karen Elliott House, to publisher of the Journal. Her proud Texan twang announced her as a standout in the otherwise meek crowd. The journalists called him “Uncle Peter,” sometimes affectionately, sometimes with derision.
Kann knew Dow Jones only as a Bancroft-owned institution. He had grown close to the elders in the family and often praised their support of Dow Jones and the Journal. He fostered the notion that Dow Jones was a “quasi-public trust”-as was once stated in the company's proxy-and that the family was a worthy defender of one of the finest journalistic institutions in the country. He believed fervently that family ownership at Dow Jones was what gave the institution the independence to pursue its stellar brand of journalism. The best papers in the country-the Washington Post, the New York Times, and the Journal-were all owned by old families with a legacy to protect. During his tenure, he had assiduously established the relationships he needed to keep the company independent.
Kann's tenure as CEO was marred by serious management missteps, capital misallocations, and a foundering stock price, but he waved off critiques of these problems. He had managed something far greater in his mind: the journalistic integrity of the Wall Street Journal. And even though he didn't think they were the brightest bunch, he had the Bancroft family to thank for that.
Zannino didn't blend in at the company, where he'd arrived from the rag trade, the son of an Italian Catholic longshoreman who took occasional work at the local bar in Everett, Massachusetts, and an Irish Catholic stay-at-home mom. Married right out of Bentley College, where sometimes it seemed he'd majored in financial aid, he started a family, worked two jobs, and slaved at night for an MBA. At forty-three, he still hadn't shaken Boston's rougher precincts from his voice. Though comfortable at Dow Jones, he had never taken on the company-wide aversion to selling the place. One of his big critiques of the Journal, which he kept mostly to himself, was that it lacked positive stories about successful CEOs and their companies. He was a businessman. Take it or leave it.
Jimmy and Zannino had worked together before. When Jimmy was an investment banker at Chemical Bank, Zannino was chief financial officer of Saks Fifth Avenue and later Liz Claiborne. They became Connecticut neighbors when Zannino moved to Greenwich (Jimmy lived in nearby Darien), home to hedge fund managers, CEOs, and their bankers. There he coexisted peacefully with all the other executives, and his son, Joey Zannino, played on the same ice hockey team as Jimmy's son, Jamie Lee-the Brunswick Bruins. As parents often do, Zannino and Jimmy chatted at games and bonded over their kids.
Zannino, with thick dark hair and square-jawed good looks, carried himself with sporty, casual ease. He had often talked to Jimmy about how he couldn't do big enough deals. Dow Jones was small and shackled to the Journal, which howled at the tiniest budget cut that diminished its reportin...