How war coverage helped put Murdoch on a media roll in Bush's America

Fox TV's rabble-rousing footage makes its owner flavour of the month in the White House

This is a very good time to be alive if you happen to be Rupert Murdoch. He has just realised his long-held ambition to break into the US satellite television market, securing the purchase of the market leader, DirecTV, after three years of tortuous negotiations with its owner, General Motors (GM).

His cable news channel, Fox News, meanwhile, has come out of the Iraq war stronger than ever. Having already overtaken CNN with its hot-blooded, rabble-rousing style and deferential approach to the Bush administration's every move, it came out as the top-rated cable station – news or non-news – in 36 of the top 40 time-slots from 31 March to 6 April.

Perhaps more significantly, it may be transforming the way Americans get their news in times of crisis. The three main networks – NBC, ABC and CBS – have been losing about two million viewers a night to cable. It is the first time they have seen audiences shrink during a war. Meanwhile, Fox's morning magazine programme, Fox & Friends, has brought in more viewers than the CBS Early Show in another unprecedented challenge to the status quo.

There are more potential windfalls ahead. Mr Murdoch's long-standing campaign to deregulate the media landscape could soon come to glorious fruition in the US, thanks to the Federal Communications Commission (FCC) and its chairman, Michael Powell.

As early as June, Mr Powell, son of Colin Powell, US Secretary of State, intends to loosen, or possibly dismantle entirely, two of the cornerstones of US media regulation: a ban on cross-ownership between newspapers and television in the same market, and another rule that says no one entity can control more than 35 per cent of the national television audience.

Mr Powell is keeping his exact intentions secret, which in itself is upsetting powerful Senators and prompting calls for a proper period of public debate before any decisions are made. And it may be that Mr Murdoch, having relieved News Corp's coffers of $6.6bn (£4.2bn) for the DirecTV deal, is not in the best financial position to take immediate advantage of more relaxed ownership rules.

None the less, the US has all of a sudden become an extremely congenial place for Mr Murdoch. The media tycoon's own agenda seems to fit hand in glove with that of the Administration and Mr Murdoch seems on a roll that others are struggling to replicate. Rival media companies, such as AOL Time Warner, are in trouble, while Mr Murdoch's News Corp has come through the downturn relatively unscathed.

The incumbents of the White House – helped into office by some psychologically crucial cheerleading by Fox News during the agonising post-electoral flap in Florida in 2000 – are most certainly Mr Murdoch's kind of people, with a strong belief in the can-do attributes of big business and an instinctive dislike of the traditions of America's mainly liberal-minded media.

Mr Powell junior has been little short of a godsend, assiduously courted by Mr Murdoch. The FCC turned down DirecTV's previous suitor – the number-two US satellite company, EchoStar – on the grounds that it might take monopoly control of the satellite sector. Then, when GM agreed last week to the News Corp sale, Mr Murdoch barely let the ink dry on the contract before he jumped on a plane to Washington to consult the FCC. He was given every indication that he would get the go-ahead on his purchase.

Nothing Mr Murdoch does happens entirely without a struggle, and there are certainly question marks about his latest initiatives. Wall Street was generally unimpressed by the DirecTV deal, mainly because stock analysts felt Mr Murdoch had paid too much for a company for which there were no other viable buyers. There are also questions about the age of DirecTV's technology – something that has caused EchoStar to steal a substantial chunk of its market share in the past few years – and about the wisdom of investing in satellite when the US seems to be a resolutely cable-dominated market.

Nobody doubts, however, that the combination of popular programming – from Fox's terrestrial channel as well as Fox News – and a powerful delivery system is something that Mr Murdoch will seek to exploit to the full. His more incendiary critics fear that he will resort to a form of legalised blackmail, threatening to pull his programming from cable operators who are not prepared to pay top dollar for them, and forcing other programmers to give him their material cheap for fear of losing their slot on DirecTV. They foresee him using his financial clout to market DirecTV very aggressively, heavily undercutting the cable companies to increase the satellite service's 11 million viewers.

Mr Murdoch argues that the terms of his purchase will preclude many of these strong-arm tactics, a point he made forcefully to the FCC and congressional committees in Washington last week. But, judging by his record, we can be confident that whatever the eventual rules of the game, Mr Murdoch will play as hard as he can.

As Merrill Lynch's media analyst, Jessica Reif Cohen, diplomatically puts it, the DirecTV deal "creates embedded leverage for Fox's cable channels with cable operators as well as provides a launching pad for new cable networks." She adds: "We expect Fox News to be a beneficiary of this opportunity."

In other words, the true-blue patriotism and liberal-baiting put-downs of Fox News ("fair and balanced", says its logo) are the future. If the FCC lifts cross-ownership restrictions in June, that would allow Mr Murdoch to expand his US newspaper interests, currently restricted to the tabloid New York Post. It may not be hard for him to find struggling city newspapers to snap up and overhaul with his Fox-style brand of populist iconoclasm.

That's good news if you are George W Bush eyeing elections next year, but as an increasing number of American media critics are saying, it may not be good news for media diversity.

Barry Diller, the Hollywood and television mogul who has rarely advocated regulation before, sounded almost alarmed at this further concentration of media ownership when he addressed the National Association of Broadcasters in Las Vegas recently. Already, he argued, lax regulations have tilted both ownership and production towards a tiny elite so powerful that everyone else is in effect shut out of the game.

This is a view that belies the theory that deregulation leads to greater market diversity, not less. According to Mr Diller and others, Mr Murdoch himself probably would not be able to launch a new network now, as he did with Fox 10 years ago. But that's of little consequence to Mr Murdoch: he is a member of the club now, and loving it. Whatever the rights and wrongs of his output, there's no denying the success of his achievement in breaking into the birthplace of modern media. From a standing start 30 years ago, he's become one of the US's most powerful players. Not bad for the lad from Down Under.