Rupert plays the Hollywood heavy: The media mogul takes his tough-guy technique to the town of sweet dreams and sweet deals. Phil Reeves reports

IT IS 6.30am. As the sun rises over Los Angeles, a green Mercedes glides out of the gates of a large Beverly Hills hilltop villa and heads quietly along the city's boulevards towards Century City. After a short journey, it pulls up in the lot at Twentieth Century Fox's executive building and discharges Rupert Murdoch, Hollywood's newest tycoon, dressed in a sober British-tailored suit.

As usual, he is the first senior executive to arrive. In the ensuing hours he will consult with, cajole, and chastise executives in London, New York and Australia as he commands his dollars 8bn (pounds 4bn) global empire. He will also turn his mind to his latest interest - the day-to-day running of a large Hollywood studio and fledgling television network.

Six months have passed since Mr Murdoch stepped in as chairman of Fox, taking over the job from Barry Diller, one of Hollywood's most powerful movie moguls, after they agreed that there was no room for them both at the company's helm. Mr Diller, whose aggressive management style earned him the sobriquet 'Diller Killer', slid calmly out of the Fox building in his Mercedes - also a 500SL, usually parked nose-to-nose with Mr Murdoch's - taking with him a pay-off of dollars 33m.

Since then, Mr Murdoch appears to have been enjoying his new incarnation. His fortunes have rallied dramatically since News Corporation ran into trouble two years ago and was forced to go, hat in hand, to its bankers to beg them to restructure its almost overwhelming dollars 7.6bn of debts. Ten days ago it reported a 65 per cent increase in net profits. This week, he must have felt inclined to dance around his desk - a Fox trot perhaps - with the announcement of another excellent piece of news.

Fox Broadcasting scored its highest ever week-long share of the ratings, beating two of its three giant rival networks, and coming top in the advertiser-attractive 18-49 age group. This was partly the result of broadcasting the Emmy award ceremony, television's answer to the Oscars, which attracted 29 million viewers despite being panned by critics who accurately described it as dismally unfunny, tedious and uninspiring. But it was another step in the journey towards his ultimate aim: the development of a fourth US network, supplied by a news service that he hopes will eventually rival CNN.

There are several theories about why Mr Murdoch came to Los Angeles. One is that he was bored. His bankers have stemmed his appetite for acquisitions by insisting that they approve any expenditure over dollars 50m as a condition of rescheduling News Corporation's debt. (Terms which prompted Robert Maxwell to brag that, 'unlike certain of my competitors, I am not required by my bankers to get permission to use the toilet'.) His British and Australian newspapers have been successfully modernised, and the Sky satellite channel is finally in the black. He needed a new project, a diversion.

It also made sense to base himself at the centre of his fastest-growing source of revenue. So he moved into his villa in Beverly Hills, which used to belong to Jules Stein, founder of MCA, and installed his dollars 2m worth of art and antiques. He also ordered the redecoration of an office at Fox, hung a few abstract paintings in it, and set up shop, commuting by corporate jet to New York and London whenever necessary.

Another view is that he has concluded that newspapers are in long-term decline, and has decided to shift his attention to the electronic media, and to integrating all the elements of his empire, from satellite TV to publishing the US's TV Guide, to form a worldwide media machine.

Mr Murdoch does not have the beaver-sleek look of a Hollywood executive, nor is there anything flashy about him. He does not frequent high society parties, claiming that he is too old both to work 12 hours a day and to socialise on a grand scale. He is also too powerful, and too indifferent to Hollywood's Byzantine politics, to worry about 'hanging and swinging' - Angeleno-speak for making contacts at cocktail parties and doing lunch.

Mr Murdoch, who has little interest in high living, prefers the company of his novelist wife, Anna, and his grown-up children. He is obviously not a classic Hollywood cigar-chomping tycoon, nor will he ever be. But he has covered his bases shrewdly.

From time to time he goes to the Beverly Hills Hotel to hobnob with the key players in the industry - a handful of heavyweights who include Robert Daly, chairman of Warner Bros, Jack Valenti, president of the Motion Picture Association of America, Michael Eisner, head of the Walt Disney Corporation, and Jeffrey Katzenberg, chairman of the Disney studios.

'I think he has ingratiated himself with just about everybody at his level in Hollywood,' said Kevin O'Brien, chairman of the Fox Affiliates Board of Governors. 'He is very well connected, and he has worked hard at that. The minute he took over the network he went out and spoke to the right people.

'But when you own the bat and the ball you can be pretty much what you want to be. I don't think Rupert needs, nor has a desire to be, an LA type. I think that's part of his charm and why he has been so successful.'

The long battle to keep control of his debt-ridden, sprawling empire throughout the past three years has taken its toll. His face is defined by deep lines, one running down his forehead, between his thick, greying eyebrows. Two others are etched into either side of his face, as if he has spent a lifetime sucking a lemon. His eyes, as ever, are impassive and stony, like those of a professional poker player. It does not look like a face capable of fun.

But he evidently likes the openness of life in Los Angeles, the lack of formality, and the absence of the insidious influences of class and clubiness that he associates with Britain and New York. There are reports that he is adapting to his new role with boyish enthusiasm. It is almost as if, at 61, his life has taken him full circle - from Adelaide, where he started out running two newspapers, to London and New York and now back to the Pacific. There is even talk of him buying a yacht.

'I like people here,' Mr Murdoch recently told the Los Angeles Times (he declined to be interviewed by the Independent). 'You hear all these things about how laid back it is here. Sure, there are plenty of drop-outs and layabouts in Hollywood, but the people who are achieving things - the actors, directors, set makers - are very hard-working professionals.'

However, his honeymoon with Hollywood is unlikely to last. For all his flattering words, Mr Murdoch is known to regard its profligacy with a distaste bordering on moral outrage. He is already training his sights on the excesses of the movie-makers who for decades have shelled out absurd quantities of money in the hope of securing a blockbuster. His television executives have recently been touring talent agencies, warning them of cost controls. Mr Murdoch's message is the same as that of Mr Katzenberg, the Disney studio chief who publicly called Hollywood to order several years ago in a widely publicised memo stating that the days of the megabuck movie were over. Only one of the 20 films that Fox plans to release next year has a budget of more than dollars 30m.

This cost-paring might explain why a number of Hollywood's agents and publicists view him with apprehension, fear even, and grumble that he does not properly understand the rules of the game, the LA lore which says that the fat cats expect plenty of cream. Peter Dekom, a leading Hollywood lawyer, is a Murdoch admirer but he accuses him of failing to grasp the necessity to pay out big sums for top people.

'Rupert Murdoch is not used to paying the kind of money to senior management that Hollywood executives clearly command. He has trouble with that . . . You can't say I want a Rolls-Royce but I am only going to pay for a Chevrolet. It just doesn't work.' Joe Roth, Mr Murdoch's right-hand man at Fox, is without a contract because of persistent haggles over money.

In particular, Mr Murdoch deplores Hollywood's sweet deals, the practice of paying superstars millions of dollars up front for a movie as well as a percentage of its profits. Steven Spielberg, Dustin Hoffman and Robin Williams, for instance, were assured personal fortunes from TriStar's hugely expensive but indifferent Christmas blockbuster Hook even before it was released. The film did not make any money.

'I think Murdoch's view is that it's one or the other,' said John Tinker, a media analyst with Furman Selz in New York. 'You either have your up-front money or you take a share of the risk, and participate in the profits. You can't have both.'

For the moment, though, Murdoch is keeping his powder dry. He does not know much about films, nor does he profess to. But by all accounts he is fast learning the ropes. He can be a stickler for detail. Some of his advisers dread contradicting him unless they are certain they are right, and he is sometimes a poor listener. But his senior staff say that he absorbs information rapidly, and acts quickly and decisively. He has already begun reading scripts.

'He is a great editor - he will do it,' Mr Diller said. 'He's doing great. He gets it, he gets it. And he has more integrity than 99 per cent of the people in this town.'

At the moment Fox executives, despite a series of recent resignations and firings, are proving loyal, although they have little choice. 'The real issue is whether he supports his executives or interferes with them,' Mr Dekom said. 'If he starts playing dirty and second-guessing them then morale will drop.' He said the signs so far are mixed. 'He is not as interfering as Barry (Diller), but then Barry earned the right to interfere.'

It would perhaps be unfair to hold Mr Murdoch responsible for the films produced by Twentieth Century Fox since he assumed day-to-day control of the studio. Many went into production before his arrival and, in any case, his film division president, Joe Roth, determines which movies are made. But his first six months have hardly been glorious.

The studio has produced no blockbusters, and only a couple of middling successes - principally the feeble, but popular, comedies My Cousin Vinny (domestic gross: dollars 55m) and White Men Can't Jump (dollars 75m). These have coincided with a crop of failures.

The company had high hopes for Buffy the Vampire Slayer, a teen-market comedy-horror starring Luke Perry, but it was a dismal flop, grossing only dollars 15m, and is now the laughing stock of the summer releases. Star billing for Meg Ryan and Alec Baldwin failed to rescue the disappointing Prelude to a Kiss, which only brought in dollars 23m at the US box office. Alien 3 is struggling to break even.

The immediate future looks more hopeful, and should bring Mr Murdoch's first big financial successes as a hands-on studio chief. Home Alone 2 is a sure money-maker, merely because of the extraordinary success of Home Alone, which cost dollars 18m and produced a box-office gross of more than dollars 500m - a windfall, which some argue saved News Corporation from collapse.

Fox is also harbouring big ambitions for Rising Sun, which is based on Michael Crichton's bestselling book and stars Sean Connery, and Hoffa, an expensive project by Danny De Vito about the life and mysterious death of the Teamsters union boss, played by Jack Nicholson.

But sure-fire hits are almost impossible to predict, and Hollywood is an incestuous community full of notoriously imaginative accountants. Mr Murdoch has only to contemplate the experience of Sony and Matsushita, whose ventures into Hollywood have badly dented their profit margins, to see how precarious the industry is.

There have been suggestions that, as he grows older, Mr Murdoch has begun to yearn for a more respectable image. In June, he sacked his protege, Stephen Chao, for hiring a male stripper to illustrate a speech about censorship at a company forum attended by the US Defense Secretary, Dick Cheney, and his wife.

He has made clear that he dislikes excessive violence in movies. He also railed loudly about TriStar's Basic Instinct, describing it as 'borderline pornography that could lead to censorship', and also Oliver Stone's JFK.

But not everyone agrees with this diagnosis. 'Do not read too much into this,' one Hollywood insider warned. 'Murdoch is primarily driven by what sells, and what will help his companies make profits.'

(Photograph omitted)

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