John Kluge, Metromedia Founder Who Did TV Deals With Murdoch, Dies at 95
By Terence McArdle
Sept. 8 (Washington Post) -- John W. Kluge, 95, a self-made
billionaire who became one of the leading entrepreneurs of his
generation and a major benefactor of the Library of Congress and
Columbia University, died Sept. 7 at his home near
Charlottesville.
His death was confirmed by the University of Virginia, which
was also a major recipient of his largesse. No cause of death was
reported.
Mr. Kluge said he accumulated more than 200 companies in his
lifetime, including seven television stations he sold to Rupert
Murdoch in the mid-1980s, forming the foundation of the
Australian media owner's Fox network.
The stations were part of Mr. Kluge's Metromedia
telecommunications conglomerate, which at various times counted
among its holdings the Ice Capades, Harlem Globetrotters,
Playbill magazine and a billboard advertising company.
Publicity shy much of his career, Mr. Kluge quietly began
accumulating radio stations with his Army discharge money after
World War II while making a small fortune as a Baltimore-based
food broker.
In 1959, he bought the remnants of the old DuMont television
and radio network. That became Metromedia, which he grew into the
nation's largest independent television business.
Metromedia stations relied on a mix of local programs, old
movies and syndicated reruns that often ran counter to what the
big three network affiliates had in the same time slot. Mr. Kluge
believed that if the networks had an 80 percent share in a major
market, 20 percent of the market wanted to watch something else.
Mr. Kluge's most daring achievement was taking Metromedia
private in 1984 because he was dissatisfied with its stock price.
At the time, he owned 25 percent of the company and borrowed more
than $1.3 billion to buy out the other public shareholders. Under
the deal, he was required to break up the conglomerate to pay off
the loans.
According to U.S. News & World Report magazine, Mr. Kluge
was among the first chief executives to finance his deal using
the leveraged-buyout technique -- in essence, buying the
controlling shares on credit.
He worked closely with Drexel Burnham Lambert's Michael
Milken, a specialist in the high-risk, high-yield securities
known as junk bonds. If interest rates had risen substantially,
Mr. Kluge might have been unable to make the payments.
Mr. Kluge sold his stations to Murdoch for $2 billion. He
told Forbes magazine that television "was going to get more
competitive. . . . I didn't feel I could take that risk, to go on
and develop a fourth network."
While focused on the leveraged-buyout, Mr. Kluge also made a
savvy investment in the cellphone business, against the advice of
many advisers who said it would take at least 10 years for the
demand for mobile phones and beepers to explode.
After buying several phone providers for $300 million in
1983, he orchestrated a $1.6 billion sale of those companies to
Southwestern Bell in 1986. The deal reportedly surprised many
analysts, who said they thought Mr. Kluge was committed to being
the fledging industry's leader.
"When we buy an asset, we look at it as a return on the
investment," he told Forbes in 1990. "With cellular, you are
buying a future price. In that light, the price we got may not
have been the peak, but it was a good value at the time.
Sometimes I might not maximize an investment. But I don't deal in
100 percent. I deal in 80 percent to 85 percent."
In all, Mr. Kluge reportedly netted $1.6 billion over and
above the initial $1.3 billion loan, an accomplishment that
catapulted him to the front rank of wealthiest Americans. In
2009, Forbes magazine estimated his fortune at $6.5 billion and
listed him as No. 35 among the 400 richest Americans.
Not all of Mr. Kluge's investments reaped profits. He lost
money on his $78 million purchase of controlling interest in the
Orion Pictures movie company and his purchase of the Ponderosa
steakhouse chain. Metromedia International Group, a conglomerate
specializing in the European and Russian telecommunications,
filed for bankruptcy in 2006.
John Werner Kluge was born on Sept. 21, 1914, in Chemnitz,
Germany. After his father's death, he moved to Detroit with his
mother and stepfather.
His stepfather wanted him to drop out of high school and
work in his painting business, but instead Mr. Kluge left home at
16 and worked on a Ford assembly line. For a time, he lived with
his typing teacher, whom he credited with being his mentor.
Mr. Kluge won a scholarship to Columbia University and told
school officials that if they really wanted him to attend, they
would have to double his scholarship money. Columbia paid.
He graduated with an economics degree in 1937. He
supplemented his tuition with $7,000 in winnings from poker.
After a Columbia dean chastised him for playing poker, Mr. Kluge
said he promised not to gamble again.
"But I never said I wouldn't play," he said.
Returning to Michigan, he was so successful doing sales work
for a paper company that he became a part owner of the firm.
After completing Army intelligence service in the Aleutian
Islands during World War II, he decided his ambitions were in
business ownership.
In 1946, he used his Army discharge money to buy his first
radio station, WGAY in Silver Spring. He continued to buy and
sell stations and invested in what became the Baltimore-based
food wholesaler Kluge, Finkelstein and Co.
He liked finding unorthodox ways to promote food products.
While working on a contract for a pickle company, he was inspired
by the new scratch-and-sniff craze to persuade the old Washington
Times-Herald to run advertisements using essence of dill in the
ink.
The effect was unfortunate, with one of his associates
telling The Washington Post in 2003 that every office in
Washington "stunk like the dickens."
But worse was when a pressman spilled dill juice at the
printing plant. "The first thing the union did when it negotiated
a new contract was to say, 'No more essence in the ink,' " Mr.
Kluge told The Post.
His entry into television began by chance, after a friend
happened to mention that DuMont was selling its stations. After
lining up investors, he bought stations in Washington (WTTG,
Channel 5), Baltimore, New York, Los Angeles and Houston.
His new company, renamed Metromedia, was headquartered in
Secaucus, N.J. Rents were lower than in New York, and Mr. Kluge
kept costs down even more with his cut-rate approach to
programming.
His frugality extended to some areas of his personal life,
such as a habit of leaving his coat in the car rather than
wearing it into a restaurant. He wanted to avoid tipping the coat
checker.
At the same time, he lived in a Manhattan apartment dubbed
"the satin citadel" by Vogue magazine, where trees grew out of
the marble floors.
His other properties included a castle on 80,000 acres in
Scotland and a $45 million estate near Charlottesville that
featured a golf course designed by Arnold Palmer.
As a philanthropist, Mr. Kluge ranked among the most
generous. In 2000, he gave $73 million to the Library of Congress
for a scholarly center and other projects. He also underwrote the
John W. Kluge Prize for lifetime achievement in the human
sciences, a $1 million award given periodically to those
distinguishing themselves in areas not covered by the Nobel
prizes, such as political science, sociology and philosophy.
Winners have included historian John Hope Franklin and
philosopher Paul Ricoeur.
Mr. Kluge gave Columbia University $400 million for minority
student aid in 2007 and donated much of his estate near
Charlottesville to the University of Virginia.
Unlike the other media barons of his era, including William
Paley, Mr. Kluge preferred to shun publicity largely out of a
desire to avoid tipping his hand about his next deal.
"If I had my choice, I'd stay in the woodwork all my life,"
he told United Press International. "I'm not ego driven."
His first two marriages, to Theodora Thomson and Yolanda
Zucco, ended in divorce. He received unwanted attention in 1985
when the British press revealed that his third wife, the former
model Patricia Rose Gay, had posed nude for a men's magazine and
appeared in a pornographic movie years before they wed in 1981.
The news dropped just before Patricia Kluge was scheduled to
help host a Palm Beach, Fla., charity ball in honor of Prince
Charles and Princess Diana. Patricia Kluge quietly dropped out of
the royal welcoming committee. She and Mr. Kluge divorced around
1990, and she received a settlement of $1 billion.
Survivors include his fourth wife, Maria Kuttner of
Charlottesville; two children from his second marriage; a son
from his third marriage; a stepdaughter; and four grandchildren.
"Work isn't really work for me," Mr. Kluge told Forbes in
1990. "I didn't think I've ever really 'worked' in my life,
because 'work' to me means that you're really doing something
that you don't like. I hate to tell you this, but I've never
liked the weekend in my life. I was enthusiastic about Monday
morning from the day I left college."
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