How MacKenzie met his match: A New Zealander known as 'James Cagney' proved to be the immovable object for the notorious tabloid king in his new job

WHEN Samuel Hewlings Chisholm, head of Sky Television, finally delivered the head of British Satellite Broadcasting to his master, Rupert Murdoch, four years ago, his next task was to sack BSB's 500 staff.

Weeks later, in jovial mood, Chisholm, as managing director of the new, merged BSkyB, presided over the staff Christmas party. Asked by one of the surviving employees how he had coped with his recent unpleasant duty, the New Zealander stunned those present by giving a simple shrug of the shoulders and the apparently sincere reply: 'No problem, mate.'

'He is not a sentimental man,' said a Sky News journalist. Last week, Kelvin MacKenzie, the abrasive ex-editor of the Sun and king of tabloid journalism, resigned as managing director of BSkyB after just eight months. He cited a 'personality clash' as his reason for leaving the Murdoch empire after more than 20 years, apparently without a pay-off or a job to go to. In Chisholm, the pugnacious MacKenzie had met his match.

For media giants, MacKenzie, 47, and Chisholm, 54, are surprisingly press shy. After more than a dozen years at the centre of the newspaper industry, however, much is known about the brilliant but often boorish and bullying MacKenzie. Less is known about Chisholm, who came to London in 1990 to join Murdoch and rescue the ailing Sky.

Chisholm is proud to say that he never gives interviews. Fortunately, colleagues and friends are not so reticent. Just 5ft 3ins tall and with little or no neck, Chisholm is often likened to James Cagney. He established his 'tough guy' reputation in Australia, where he is as notorious as MacKenzie is here. The son of a prosperous farmer, he began his career in wax, as a saleman for Johnson's. 'He's been a salesman ever since,' said an ex-colleague. 'He specialises in selling himself. He isn't loud but when he walks into a room you know he is there. He has presence.'

Chisholm, who has one daughter, is married to a former Miss New Zealand. He began his media career at 24, in the marketing department of Channel Nine in Melbourne. He had been running the station for 15 years when he was wooed by Murdoch. In accepting the offer he completed an Australian media hat-trick, having already worked for Alan Bond and Kerry Packer. In four years he has transformed an pounds 11m-a-week loss to a pounds 4m-a- week operating profit.

'He is tough and aggressive but he has achieved a turnaround,' said another former employee. 'He is a hard taskmaster but he also inspires great loyalty among his staff.' On his 50th birthday, employees gave him a Harley-Davidson motorbike.

BSkyB staff may respect Chisholm's professionalism, but last week 'the flags were out' when MacKenzie left. From the start, MacKenzie said he would soon be chief executive. Long-term succession may have been what Chisholm had in mind. The problem, say insiders, was that MacKenzie was too impatient to learn. 'He knew nothing about television and he wasn't prepared to watch and learn. He was not used to answering to anyone and he wanted to run the show right away.'

His arrival also came at an awkward time for BSkyB. Experts have begun to question the long-term prospects for the station after a disappointing summer in terms of viewing figures. There are signs that the strong growth of the station since the merger may be tailing off.

Media analysts are divided. Rebecca Winnington-Ingram of Morgan Stanley, the US investment firm, says most things at BSkyB are going to plan. 'BSkyB has 3 million subscribers with dishes and 640,000 people who take the stations via cable. You could hardly describe that as a dead medium.'

She feels the recent spate of bad publicity for BSkyB is more to do with Rupert Murdoch's decision to start a price war in the newspaper industry (thus causing untold damage to his newspaper rivals) than with a fundamental change in BSkyB's prospects.

But BSkyB has suffered a drop of 18 per cent in average viewing per customer since 1993. And Colin Donald of New Media Market, a media newsletter, says dish sales are showing signs of flattening. BSkyB will increasingly have to compete with cable and other forms of new media such as on-line computer services, video on demand down the telephone line, CD-based computer games and educational titles.

It was in this uncertain climate that MacKenzie arrived - and soon clashed with Chisholm. The first public shouting match apparently came in March. By then MacKenzie had assumed day-to-day running of the company while Chisholm was abroad tending Murdoch's awesome global media interests. Whatever the row concerned, witnesses say Chisholm 'out-Kelvined Kelvin' - who, prior to becoming a TV executive, had called TV employees a bunch of 'parasitical pansies'.

Chisholm believes in buying in the best talent and keeping it. The resignation two months ago of the head of news, Ian Frykberg, a fellow New Zealander and a journalist Chisholm greatly admired, is seen as a turning point.

Frykberg signed a confidentiality agreement as part of his pay-off from BSkyB and will not comment, but colleagues say he and MacKenzie were at each other's throats from the start. MacKenzie regularly referred to 20-stone Frykberg as a 'fat ****'.

'Frykberg would go in with his financial projections,' said one colleague. 'Kelvin had no understanding of them and after a few minutes Frykberg would leave with Kelvin shouting down the corridor that he could whistle for the money.'

Frykberg resisted tabloidisation by MacKenzie. Early on he refused to run an interview with Lady Bienvenida Buck about her affair with Sir Peter Harding, the Chief of the Defence Staff. Lady Buck eventually turned up on the entertainment channel but MacKenzie did not give up. Frykberg eventually resigned just before a half-hour interview with the Harkess family who flew in from South Africa to describe the former minister Alan Clark's penis to Sky News's breakfast viewers.

BSkyB staff say that, while there was tension over just how tabloid Sky News should become, MacKenzie's resignation was more about personalities than policy.

'In the end it was a race between being sacked and resigning,' said the BSkyB executive. 'But no one believes that MacKenzie walked out without at least pausing to ring Rupert Murdoch. It is obvious that Rupert did not back him. In the expanding empire he needs Chisholm more.'

Conspiracy theorists wonder if Murdoch ever intended MacKenzie to succeed. They favour the view that Andrew Neil, former editor of the Sunday Times, and MacKenzie were removed because John Major, upset at endless carping in their papers, threatened Murdoch with restrictions on cross-media ownership if he did not reign them in. It was, they say, really a case of 'what the hell do we do with Kelvin?' rather than 'what can Kelvin do for Sky?'.

However, Roy Greenslade, former editor of the Daily Mirror, doubts that the partnership between Murdoch and Mackenzie is over. He believes MacKenzie massively miscalculated the level of Chisholm's influence with Murdoch.

He insists that the popular notion of Murdoch surrounded by dependent executives, capriciously deciding who should rise and fall, is mistaken. Murdoch, he says, is rational and loyal to those he likes and who have served him well. MacKenzie was a brilliant editor who made his boss a lot of money. 'Rupert is genuinely fond of Kelvin. It beggars belief that this is the end of the Murdoch-MacKenzie saga.'

(Photographs omitted)