John Werner Kluge

Introduction

One of John Werner Kluge’s (born September 21, 1914 in Chemnitz, Germany; died September 8, 2010 in Charlottesville, VA) favorite stories involved the time he got caught gambling while a student at Columbia University and was well known for his on-campus card games. One day, however, he found himself in the office of the dean, who threatened to revoke his scholarship. The apologetic Kluge promised the dean would “never catch” him gambling again. At this point, Kluge would set up his punch line—“I didn’t say I wouldn’t gamble again, I said he’d never catch me again.”[1] Known for his initiative, drive and determination, Kluge enjoyed taking risks, especially in business, and shunned the idea of a sure thing or a safe investment. He became one of the most successful media executives in the mid-twentieth century.

Through a series of savvy investment moves that drew on his uncanny ability to predict market demands and take calculated risks, John W. Kluge rose to the top of the U.S. media industry. He was one of the first to advocate a multimedia approach to marketing, and offered advertisers a variety of potential outlets to reach consumers. He transformed the Metropolitan Broadcasting Corp., which consisted of two floundering television stations and two radio stations, into Metromedia, Inc., which became the largest independent television business in the United States during the height of the major broadcast networks’ power in the 1960s and 1970s.[2] At its peak, Metromedia, Inc., represented a series of profitable and diverse media entities. It “leapfrogged” through the industry to acquire holdings that included outdoor advertising, direct mail, independent television and radio stations, and popular entertainment entities such as the Ice Capades and Harlem Globetrotters, among others.[3] Kluge’s goal was to create an empire that leveraged different media platforms to better communicate marketing messages.

Kluge’s business strategy emphasized the pursuit of promising new technologies while keeping operating margins low. He continually sold off underperforming properties, and looked for opportunities to expand into sectors competitors neglected, whether it was independent broadcast stations or wireless opportunities abroad. Under his stewardship, Metromedia stock became a darling of Wall Street. As the market outlook for independent television operations dimmed, he took his company private through a leveraged buyout in 1984. Most notably he sold Metromedia’s eleven television stations to Rupert Murdoch for approximately $2 billion in 1986, which made Kluge a billionaire.[4] Active in business well into his eighties, Kluge never lost his appetite to broker deals and forge ahead. He “savored” the challenge of commercializing new technologies.[5] Nascent markets or ignored industry segments intrigued Kluge the most—they typically offered little competition, and gave Kluge the chance to establish a beachhead in an industry before the heavyweights moved in. He followed that strategy in broadcasting and cellular telephones, and somewhat less successfully through ventures into laser disc technology and music recording.

Yet, the man with the “Midas touch” who topped Forbes’ list of wealthiest Americans from 1989 to 1991 was also one of its most private. The reserved and reticent Kluge shunned publicity and was reluctant to give interviews during his lifetime. He remains “one of the least known but most powerful moguls in modern television industry,” according to broadcast scholar Douglas Gomery, due in part to the amount of attention given to other television executives such as David Sarnoff and William Paley.[6] Broadcast histories tend to underestimate the market impact of Kluge’s independent stations, and Metromedia’s diverse holdings and corporate reinventions have complicated its story and made it difficult to gauge its influence. Even contemporary news coverage found it challenging to discuss Kluge’s motivations, due to the lack of access to the company. A 1982 Barron’s profile of Metromedia tried to pinpoint the root of Kluge’s success and had to rely on interviews with other company executives, colleagues, industry sources, competitors, Wall Street, and publicly available material to shed light on Kluge and Metromedia.[7] Privacy was key to business operations, according to Kluge.[8] He disapproved of self-promoting executives who embraced the limelight, and was content to let his business accomplishments speak for themselves “without a lot of fanfare.”[9] That level of secrecy let Kluge zig when the market zagged—a tendency that served him well ever since his arrival in the United States as an eight-year-old in 1922.

Family Background

Born September 21, 1914, in the manufacturing city of Chemnitz, Germany, Johannes Kluge grew up in a tenement house with his mother and grandmother. His father died in World War I before he was born, and his mother worked six days a week as a typist to support the family. An only child, Kluge often challenged the other neighborhood boys to games of marbles in a nearby park, where he demonstrated his proclivity for risk taking. He played for keeps, and claimed to have won more than two thousand marbles from the other children. Eventually, he noted, they stopped playing with him.[10] When the family moved to Schönau, a different district of Chemnitz, Kluge’s mother met Oswald Leitert, a German-born widower visiting from Detroit. Leitert was an American citizen, and promised to move Kluge and his mother Gertrud to the United States after they wed. When the family arrived in New York harbor on September 15, 1922,[11] Kluge recalled the crowds of immigrants lined up on the deck of the USS George Washington, waving at the Statue of Liberty. As for many immigrants, the statue became a “symbol of freedom” for Kluge, and he maintained a “soft spot” for the Statue of Liberty throughout his life.[12] The family stayed at the Taft Hotel in the heart of New York City, where the bright lights and sounds of the city enchanted Kluge. He made up his mind to return to New York one day.

Kluge’s stepfather ran a painting and contracting business in Detroit, and at first the family lived in the city. Eventually, they moved to a small farm in Redford, Michigan, on the outskirts of Detroit, where Kluge soon began to demonstrate his entrepreneurial prowess. He sold apples from his family’s fruit trees alongside his uncle, delivered newspapers, and washed windows. He set up a lawn cutting and snow shoveling business, and trained neighborhood boys to work for him so he could increase profits.[13]

Kluge realized early on that education would be the key to advancement in the United States. When he arrived, he did not speak any English, and attended a local Lutheran school where his schoolmates dubbed him “Hans the Hun.” He began carrying around an English-German Webster’s dictionary everywhere he went for ten years—“to school, to church, back home”—determined to learn English and speak it without an accent.[14] After Kluge finished eighth grade, his stepfather encouraged him to leave school and enter the family business. Kluge refused, and later referred to it as one of the first big risks he took. He convinced his stepfather to allow him to attend one year of high school, and, after earning high marks, asked to finish. When his stepfather forbid him to do so, Kluge left home without knowing where he would sleep. He was “never afraid of making a decision, regardless of the consequences,” he said. Kluge knew that working for his stepfather in Detroit meant that he would remain a “second-class citizen,” with little chance to make his own mark.[15] Education provided Kluge with a pathway to achievement, and he set out on his own.

One day, while washing a car for Garcia Gray DaRatt, a former teacher, Kluge revealed he had nowhere to live. She immediately took him in, and DaRatt would become one of the most influential people in Kluge’s life. Kluge noted that he “became an adult” between the ages of fourteen and eighteen, due in part to the high standards DaRatt set. She wanted to ensure Kluge would attend school beyond high school, and encouraged him to expand his worldview. She taught Kluge about table manners and the nuances of American culture. Visitors to the house included prominent businessmen and judges, and their conversations provided Kluge with the “sign posts” that would shape his business philosophy. “Living with Mrs. DaRatt, little by little I formed a conclusion that I wanted to be somebody but not on the basis of cheating or fooling people,” Kluge later said. “I’ve always been more interested in substance than perception. If the substance is right, I feel that everything is right.”[16] He became an honors graduate of his high school and attended Detroit City College, later renamed Wayne State University. After one year, he transferred to Columbia University, which offered him a full scholarship plus living expenses.

Throughout his lifetime, Kluge’s upbringing provided him with a tremendous amount of motivation, although he admitted he never felt “rooted in a place.”[17] Rather, he was rooted in ideas, many of which he learned while under Garcia Gray DaRatt’s tutelage. Kluge often spoke of his mentor with much affection. In 1938, Kluge placed second in a Detroit Times contest, and used part of his $2,000 to buy DaRatt a car.[18] In an April 29, 1938, Detroit Evening Times piece published on the contest winners, Kluge praised her for her role in helping Kluge achieve an education and encouraging him in his business ventures.

Business Beginnings

Kluge’s tenure at Columbia provided glimpses of his entrepreneurial drive and an affinity for deal making. He earned extra money by running a shoe, garment, and stationary business; he served as a meal pricer for a university dining hall; and provided private secretarial service for the son of the president of China. He even “flirted with the idea” of moving to China after graduation to start a competition to the East India Company, using his classmates’ personal contacts and business connections, but the war between China and Japan in 1937 put that idea on hold.[19] He graduated with a degree in economics, and took a job for the Otten Brothers Company—a paper company—on the promise that he would work without a salary and receive compensation for only his expenses. As part of the deal, the company promised him a one-third interest in the business if he doubled sales. Kluge hit his target.

After his service in World War II as an army intelligence officer, he sold his interest in the company and used his earnings to fund a number of business ventures, including the purchase of a radio station. Along with a partner, he bought WGAY in Silver Spring, Maryland, in 1946 for $15,000 (roughly $179,000 in 2013), after reading a Wall Street Journal article about the radio industry. The November 1945 piece, he claimed, noted the relatively low start up costs of a radio station compared to television, which was projected to cost an investor close to $340,000 (roughly $4.4 million in 2013). The Wall Street Journal article also expected strong consumer interest in radio to continue, since wartime materials shortages slowed television manufacturing, and anticipated radio would remain the dominant mass medium for advertisers.[20] Kluge promised to attract advertisers to the station if his business partner would manage the station. Within one year, they had the television station up and running, and were the subject of a profile in the Saturday Evening Post. One of the station’s more popular advertising promotions was with Qantas Airlines, which offered listeners a one-way ticket to Australia for their mother-in-law as a prize.[21]

The radio station was not Kluge’s only business enterprise in the late 1940s—he concurrently ran a Boston-based food brokerage called the New England Fritos Corporation. The distribution company introduced Fritos and Cheetos to towns from Maine to New York, and worked to place the products in supermarkets throughout the region. Eventually, Kluge moved the brokerage to Washington, D.C., and added new product lines, including those of Standard Brands and Simon and Schuster. He focused less on placing the goods in “small mom-and-pop stores” and instead invested his energy in soliciting the business of the chains he thought would “make it” in the long term, such as Stop ‘N’ Shop and First National.[22] The experience marketing goods gave him insight into the advertising industry, as well as perspective into the challenges of selling consumer products in a rapidly changing communications environment. His success made him “in demand as a consultant in design, advertising and distribution to several leading marketers,” and he relied on that experience when he created Metromedia.

Building the Metromedia Business Empire

The creation of Metromedia, Inc. and its rise as a major media empire in the 1960s and 1970s best reflected Kluge’s core business strategy. Kluge adhered to the mantra of “make money and minimize taxes” [23] and “buy and build.”[24] He would sell underperforming properties in favor of those with greater profit potential, and pursued new technologies and market sectors that his competitors neglected. In the occasional interview, he described himself as a “businessman on the prowl for a good opportunity,” and stressed his love of constructing a good business deal.[25] He loathed what he called the “self-important corporation types cut out of the same cookie cutter” who adhered to safe investments and shunned new technologies.[26] Harkening back to his Columbia University days, Kluge always viewed himself as a bit of a gambler—albeit one who regularly read the Wall Street Journal and followed market reports. Discussing their business strategy in the late 1990s, his longtime business partner Stuart Subotnick noted that they had “never gone where the herd goes. By the time the herd shows up, it’s too expensive.”[27] Kluge liked to venture out on his own, and, as he started compiling the building blocks for Metromedia in the late 1940s, the herd had largely left the radio business.

Kluge’s radio and television holdings formed the heart of Metromedia for more than two decades. In 1959, he purchased a controlling interest from Paramount Pictures in Metropolitan Broadcasting, which at the time consisted of two television stations—WNEW in New York and WTTG in Washington, D.C.—and two radio stations. It contained the remnants of the failed DuMont Network, a broadcasting subsidiary of the Allen B. DuMont Laboratories that was spun off as an independent operation in 1946. As one of the first commercial broadcast networks in the United States, the DuMont Network floundered as television grew in popularity, and lost substantial market share to rival networks NBC, CBS, and ABC. The deck was seemingly stacked against DuMont from the beginning; although the company had an edge as a manufacturer of television sets, it did not have a radio network from which to pull talent easily. Consequently, it faced higher costs for operating broadcast stations and producing content—issues that the other networks did not have to navigate. Additionally, DuMont depended on ultrahigh frequency (UHF) panels as a result of the Federal Communications Commission (FCC) reliance on the UHF channels to provide third channels in many markets. Because not as many televisions offered UHF channels, advertisers flocked to very high frequency (VHF) channels, which were typically assigned to NBC and CBS. DuMont submitted various plans to the FCC that favored network competition and created four networks on the same frequency, according to the broadcast historian James Baughman. But the FCC was worried the plan would leave rural residents with no television service, and its 1952 allocation plan “handicapped” DuMont.[28] By 1956, DuMont ceased broadcasting.

According to Kluge, DuMont’s biggest problem as a network was that Allen DuMont was not a great marketer, and had no experience running a consumer-focused company. When Kluge assumed leadership as chief executive officer in 1959, his goal was to change the company’s operations entirely.[29] Despite its unprofitability, Kluge believed Metropolitan Broadcasting could be a “vehicle for developing a new concept in the field of communications.”[30] In its first full year of operations, Metropolitan Broadcasting did a gross volume of approximately $5.6 million, was “highly unprofitable” and lost nearly $1 million.[31] In its first two years with Kluge at the helm, the company aggressively expanded, committed over $34 million to buying new, more profitable properties, and notably shunned purchasing the more expensive network affiliates. Kluge focused on independent stations, snapping up stations in major cities at relatively good prices. It added nine radio and television stations in “rapid succession,” including WIP-AM-FM in Philadelphia; KOVR (TV) in Stockton-Sacramento, CA; WTVH (TV) in Peoria, IL; WTVP (TV) in Decatur, IL; the KMBC stations in Kansas City; and the Worldwide Broadcasting System. Additionally, it acquired the Foster & Kleiser outdoor advertising company for $14 million, which marked its first foray outside broadcasting.[32]

As Kluge continued to build his media combine, he needed to move away from the “limiting” name of Metropolitan Broadcasting. In 1960, he changed the company to the more “descriptive” Metromedia. “The ‘metro’ came from our belief that the American marketing system would concentrate its efforts more and more in major metropolitan markets,” he said in his 1973 address to the Newcomen Society, an organization dedicated to the study of science and technology. “The ‘media’ came from our conviction that, in order to effectively communicate with its consumers, American business requires a multi-media approach.”[33]

From the beginning, Kluge’s corporate philosophy contained several principles that guided Metromedia’s growth and built on his previous entrepreneurial experiences. First, Kluge cultivated a high-grade management team. The effort to improve management quality and depth cut across all levels, corporate and divisional, with the goal of maintaining continuity. Kluge told the trade magazine Broadcasting that “growth is an enabling factor in attracting the best people, and the best people are essential to the organization. There’s nothing worse than having a ceiling on top of young, creative people.”[34] He believed that his employees did not work for him, but rather with him, and created a variety of incentives to foster an environment that provided room for advancement, including stock options. As a result, Metromedia experienced minimal turnover, which created a sense of stability that attracted attention from Wall Street and pleased its stockholders. Many of the company’s key executives were long-time employees.[35]

Kluge also developed quality facilities, although he proudly ran Metromedia on a “tight budget.” He located Metromedia’s headquarters in Secaucus, New Jersey, across the river from New York where rents were lower, and he policed company expense reports. Kluge enjoyed telling an anecdote about a contest he ran to keep costs low— once calling an executive in Kansas City to let him know that he won that month’s prize for the highest phone bill. After that, phone bills went down companywide, Kluge claimed. Metromedia was lean because it had to be—the company “would go broke otherwise.”[36] Indeed, under Kluge’s stewardship, Metromedia “made millions with relatively small audiences, because costs of operation were so low.”[37] When, in 1989, he made the top of Forbes’ list of the richest people in the United States, Forbes dubbed him the “cheapskate billionaire.”

Finally, Kluge operated with the strong conviction that Metromedia was in the “process of building a major force in the field of American marketing communications.”[38] By 1960, the “media combine” grossed more than $40 million (roughly $315 million in 2013) and announced revenue expectations of more than $100 million by 1965 (roughly $738 million in 2013), due in part to Kluge’s quick efforts to differentiate its holdings and his eagerness to acquire more profitable entities.[39] Kluge adhered to a liberaldefinition of “communications,” and focused on the industry in all its forms. In addition to outdoor advertising, he moved Metromedia into the music business, and its music publishing and recording division contributed to the company’s rebound in 1970 after a disappointing 1969, when profits hit a seven-year low. By the early 1970s, Metromedia also had an interest in bus advertising in a number of cities, along with a television programming production subsidiary and a direct mailing operation. The company also purchased the Ice Capades and its subsidiary, Mount Wilson Skyline Park in Los Angeles, as well as Playbill Magazine, in order to offer a diverse set of media platforms to potential advertisers. Kluge called the marketing of goods an “obstacle course,” and, through research and knowledge of the changing media landscape, as well as access, his company was there to help the “people who are running the course.”[40]During an address to the Newcomen Society in New York in 1973, Kluge called Metromedia an “important part of the American marketing system.” At the time, the company was active in four of the six major media classifications which businesses used to target consumers—broadcasting, out-of-the home media, publishing and mail marketing, and entertainment—and owned television stations in major markets. Not everything Kluge acquired was a success; notably, his 1965 purchase of Diplomat magazine was a black spot on his otherwise golden business record. Metromedia was not alone in its efforts to diversify in the 1960s; other broadcast companies added new revenue streams in response to the FCC’s cap on the number of television stations any one company could own.[41] Yet, despite Metromedia’s various business interests, the broadcast stations remained at the core of its business.

Metromedia pursued the purchase of independent stations due in part to their relatively low operating costs, but also because Kluge anticipated advertising expenditures would increase dramatically as televisions rose in popularity. Television rapidly became the United States’ dominant mass medium. By the end of the 1950s, just twelve years after its introduction, nearly 90 percent of American homes had television sets.[42] The networks would not be able to keep up with demand, Kluge reasoned, which put independent stations in a position to absorb the overflow. Additionally, as the three networks grew stronger and stronger, they would raise their advertising rates, which would “give independent stations an umbrella.”[43] His bet worked. In 1972, Metromedia revenues totaled $182 million and profits hit $12.5 million (more than $1 billion and $69.6 million respectively in 2013).[44] Metromedia’s television stations were responsible for the majority of profits, and the “big payoff” for the company came in 1976, when overall broadcast advertising expenditures grew about 27 percent and Metromedia’s broadcast earnings almost doubled. In 1981, the TV stations, together with fourteen radio stations, generated 70 percent of Metromedia’s profits. [45] At the same time, Kluge identified another means by which to boost the market value of Metromedia’s stations by increasing its viewership numbers. A “wealth of top-notch” television shows were up for syndication, including “M*A*S*H,” “All in the Family” and “The Mary Tyler Moore Show.”[46] At the time, independents were able to keep operating costs relatively low because they did not, for the most part, produce their own programming, and instead relied on a formula of syndicated network TV shows, low-budget movies, and the occasional program produced in-house. Metromedia, for example, made several of its own shows, including the original “Jeopardy!” and specials with Jacques Cousteau.

Kluge developed a formula of local and national shows, and had the “right vision at the right time” in the broadcast industry, according to the communications scholar Walter Podrazik.[47] He used Metromedia’s advertising profits to buy the syndication rights for shows as they came on the market, and the independents picked up market share because of better programming. They also counterprogrammed, and would beat network nightly news broadcasts by one hour, airing news at 10 p.m. instead of 11 p.m.. Metromedia stations aired ballet performances, tennis, movies, and other programs designed to draw viewers away from the major networks.[48]

The period from 1974 to 1982 marked a strong run for shareholders. Revenue increased to $462 million from $188 million, and profits climbed from $1.02 to $14.38 per share. Wall Street analysts, shareholders and business journalists alike gave much of the credit to Kluge. Barron’s called him a “genius” that possessed a “superb knack for managing cash flow and minimizing taxes.”[49] He “wrote the book” on communications empire building, gushed the trade publication Broadcasting & Cable.[50] His ability to anticipate broadcast market movements made him a “visionary,” said the Los Angeles Times.[51] Yet, despite Metromedia’s success, Kluge continued to operate out of view and gave little indication publicly as to what his next moves would be. He kept no public relations officers on his payroll, the New York Times noted, because they were a distraction. “I think a great deal of publicity becomes an obstacle,” he told the Times in a rare interview. “I’d love to be in the woodwork all my life. I enjoy it when I know who the other people are and they don’t know who I am.”[52]

Moving into the Cellular Industry

So as cable began to siphon away viewers from the three networks and independents, Kluge quietly realized Metromedia needed to rethink its approach and undergo a reinvention. New technologies had always intrigued him, and he saw a unique opportunity in the emerging paging and cellular phone industries. He attempted to gain a foothold in the wireless marketplace by selling off the pieces of the Metromedia empire that either were underperforming or did not offer much future revenue potential, and exchanging those for more lucrative properties. At the time, Metromedia’s stock was declining, and Kluge was “ready for something new.”[53] In 1984, Kluge led a $1.1 billion leveraged buyout in order to take the company private because he was unhappy with its valuation on Wall Street and craved the freedom of making business decisions without having to think in terms of stock price. He bought the company for roughly $40 per share, and, over the course of the next two years, sold off its parts for a total of about $4.5 billion. According to Kluge, that was “the biggest risk” he ever took, as he had to borrow $1.3 billion personally in order to facilitate the buyout.[54] He sold Metromedia TV to Rupert Murdoch in 1986 for approximately $2 billion, in a deal that the Wall Street Journal described as “secretive, imaginative and for not a penny less” than what Kluge wanted.[55] He had moved quickly, and brokered the deal with Murdoch and his investment team only weeks after he began hunting for buyers.

The move put Kluge near the top of Forbes’ richest 400 Americans, and gave Murdoch the foundation for the Fox Network. Kluge then parlayed his new cellular and paging interest into greater profits, and held the list’s top spot from 1989 to 1991. His ability to anticipate changes within the broadcast landscape impressed observers the most—he knew when to get into the industry and when to get out, noted Podrazik. His predilection for risk-taking paid off more times than it did not, and his market intuition seemed to be unparalleled. Kluge beat many of his competitors to the cellular industry, and his willingness to reinvent himself and pursue new acquisitions demonstrated a flexibility that made him stand out from his peers.

Throughout the 1980s and 1990s, Kluge managed to avoid the “cookie cutter” corporate executive label he eschewed from the beginning. Just as he was getting out of the broadcasting business, he began purchasing a series of cellular networks in large American cities and reinvented himself as a “cellular industry pioneer.”[56] His new company, Metromedia Co., snapped up networks in Chicago, New York, Baltimore, Washington, D.C., and Philadelphia, among other areas, and started acquiring paging services and long-distance telephone carriers. Kluge’s status as an early mover in cellular service paid off handsomely. He sold part of his cellular business to Southwestern Bell Corp. in 1986 for $1.2 billion (equivalent to more than $2.5 billion in 2013), and unloaded Metromedia’s Philadelphia network to Comcast several years later for $1.1 billion. He continued to look for his next investment opportunity, and showed no signs of slowing down. He told the Wall Street Journal that he was in no rush to spend the substantial pile of cash Metromedia accumulated by unloading its properties in the 1980s: “We don’t feel any compunction to be in a hurry.” Metromedia was conducting a “comprehensive study” of all its opportunities available, with special interest to developing markets for telephone and broadcasting services in Europe and Asia. Kluge relished the chance to reinvent himself. New investments and acquisitions made life “interesting,” he said. [57] A quiet retirement away from the boardroom did not.

Social Status and Philanthropy

But there was more to John Kluge than his role as a media tycoon and risk-taking deal maker. He collected Australian aboriginal art and filled his estates in Charlottesville, Virginia, and in the Scottish Highlands with antiques, but was most known for his philanthropic gifts, primarily to educational institutions. His $60 million donation to Columbia University in 1993 (roughly equivalent to $96.7 million in 2013) represented the largest single gift the university had received. Kluge indicated that the funds were to be used for minority scholarships, and were designed to attract minority candidates who might have otherwise attended other universities. Recalling his own experience at Columbia University in the 1930s and the financial hardships he faced, Kluge hoped the gift would have a broader impact than having his name grace a building or a monument. “I’d rather do something for human minds than for a monument,” he told the New York Times after the gift was announced. “It’s been offered to me time and time again, not only at Columbia but at other colleges, but I’m not interested in having my name on a building. … I think the need is there. In my small way, I’m addressing that need.”[58] He viewed his experience at Columbia as a defining moment in his life, and wanted to provide that opportunity to others. Kluge previously donated $50 million to the university; when the two gifts were combined, the $110 million total was only second at the time to a $125 million gift to Louisiana State University from Claude B. Pennington.

New York society embraced Kluge, who, along with his third wife Patricia Maureen Rose (he had been married previously to Theodora Thomson Townsend, then Yolanda Galardo Zucco), frequently attracted the attention of the city’s society columnists. It was quite an achievement for John and Patricia, a former model who was part English, part Iraqi and about four decades her husband’s junior. Their ability to ascend the city’s social ranks was due in part to their willingness to play by the unwritten rules and standards that determined who was an elite member, and who was merely a wealthy New Yorker. The main rule was to be charitable—“you can’t leave your money in the bank,” New York Times society columnist Sharon Churcher wrote. “You must be willing to plunge it into entertaining and charity parties.”[59] For Churcher, the Kluges were role models. They held fundraising parties, and, in addition to gifts to educational institutions, frequently gave to other causes as well, such as the American Foundation for Aids Research (AmFAR). Patricia became known for her “lavish parties,” although a “small scandal” erupted in 1985. Patricia was the chairwoman of a charity ball in Palm Beach attended by the Prince and Princess of Wales. A few days prior, the British press disclosed the existence of a naked photo of Mrs. Kluge. The couple ended up traveling abroad the night of the ball.[60] In 1990, the couple divorced, citing “irreconcilable differences.” True to form, the divorce was quiet, private and done in “impeccable taste.”[61] John Kluge later got remarried—for a fourth time—to Maria Tussi Kuttner, who, like him, was also German born.

In 2000, on occasion of the two-hundred-year anniversary of the Library of Congress, John Kluge gave $60 million to establish an in-house center for academic research.[62] Today the John W. Kluge Center is a renowned institution that has, for over a decade, brought together scholars from around the world “to stimulate and energize one another, to distill wisdom from the Library's rich resources, and to interact with policymakers and the public.”[63]

Late Life and Business Activities

Kluge spent the 1990s looking for new business challenges and deals to broker. Now head of Metromedia International Group, he oversaw a business with diverse assets, including Orion Pictures and the lawn products company Snapper. But the company’s communications division remained the “crown jewel” in Kluge’s empire, although Metromedia was a “bantam in a world of communications heavyweights,” with fewer than 200,000 customers for its “grab bag of services,” which ranged from wireless cable TV and telephone to paging. By then age eighty-two, Kluge began his “most ambitious enterprise” in the late 1990s, which involved the construction of wireless cable television and telephone networks in Eastern Europe, Russia, the Baltic states and China, where Metromedia partnered with a Chinese phone company called Golden Cellular. Kluge’s strategy rested on a “beguiling simple premise”—he would beat the competition to these “embryonic markets” and establish solid footing before market leaders like AT&T entered. [64] Kluge’s wireless strategy reflected his initial approach to entering the broadcast industry. Competition crowded the U.S. market, which raised the barrier to entry and increased operational costs as well. By focusing his efforts on undeveloped markets with a low barrier to entry—first independent broadcast stations and then neglected global cellular markets—Kluge believed he could win a substantial customer base.

But cracks started appearing in Kluge’s empire as the decade wore on. Metromedia’s joint venture with Golden Cellular in China was beset by misunderstandings between the two companies, and in Russia, Metromedia had to battle the perception that foreign companies failed to deliver on promises. The greater problem, however, was Metromedia’s image on Wall Street. What investors had once seen as an empire and a bustling media combine was now a “hodgepodge” of seemingly unrelated businesses and a maze of different interests.[65] Beginning in 2000, numerous activist shareholders began pressuring Metromedia International Group to break up, and complained that the company’s story was “unclear” to Wall Street, which had led to substantial decreases in the stock price. They blamed the management team, including Kluge, for losing track of Metromedia’s communications focus.[66] Dissident shareholders also publicized their plans to thwart any attempt to take the company private. They feared history would repeat itself, and that Kluge would buy the company’s depressed stocks and sell Metromedia International’s assets at a mark up.

Then, just two years later, Metromedia Fiber, a telecommunications company, filed for bankruptcy after it had failed to win enough customers for its high-speed internet service in urban areas. The New York Times dubbed it a “rare setback” for Kluge.[67] Metromedia Fiber operated in a corner of the broadband once seen as attractive because of its “complexity and relative lack of competitors,” but as service outpaced demand, it became a “casualty of the telecom meltdown.” Several other companies in the sector filed for bankruptcy in the same year.[68] Kluge’s private holdings, which included the Ponderosa Steakhouse chain and interest in Orion Pictures, also floundered. Despite these missteps, Kluge remained committed to the principles that guided him from the start—searching for new technologies, taking calculated risks, and never being content to play it safe. When he died in September 2010 at age ninety-five, he was remembered for his love of brokering a deal. His creation of Metromedia was dubbed a “triumph of financial structuring,” and most likely one of his proudest accomplishments.[69]

Conclusion

John Kluge had an innate ability to predict what consumers would want or need next—whether it was bringing Fritos and Cheetos to New England in the 1950s, or snapping up independent TV stations and syndicating the rights to reruns of M*A*S*H and the Mary Tyler Moore Show. His ability to anticipate market changes and identify emerging communications opportunities distinguished him from other businessmen of his era, and led his contemporaries to describe him as “perpetually driven to devise new challenges and then to surmount them.”[70] Not beholden to one, fixed image of a corporate executive, he pursued investments in industries as varied as broadcasting, laser disc technology, chain restaurants and steak houses, professional soccer, cellular phones and high-speed internet connections. When introducing Kluge as a speaker to the Newcomen Society in New York in 1973, David Mahoney described him as having the “enviable reputation as one of the outstandingly successful innovators” in the field of communications and technology. Kluge’s life and career followed one of the favored historical narratives about American business—“that a man with energy and vision can continually transform himself and his circumstances through his individual effort, and propel himself to the front rank of leadership.”[71]

Kluge also made sure he never forgot his roots, and worked to ensure others were provided with the same opportunities as he was. Being somebody, according to Kluge, was not necessarily about creating a personal empire or a $1 billion valuation—it was about personal achievement. At the time of Kluge’s death on September 7, 2010, his gift to Columbia University supported approximately two hundred Kluge scholars at any given time.[72] The college recognized his generosity, along with his own accomplishments, with an honorary doctorate in 1988. Kluge liked to remind others that he arrived at Columbia University with $15, and left with several thousand dollars upon graduation. At the 1937 commencement, the university displayed headstones for each graduate with a humorous quote that best captured their time on campus. Kluge’s read: “I’m wiser. I sold my body for fertilizer.”[73]

Notes