Hack job! Murdoch axes paper to save deal

LONDON, (Reuters) – Rupert Murdoch will shut down  Britain’s biggest selling Sunday newspaper, the News of the  World, in a startling response to a scandal engulfing his media  empire.

James Murdoch

As allegations multiplied that its journalists hacked the  voicemails of thousands of people, from child murder victims to  the families of Britain’s war dead, the tabloid hemorrhaged  advertising, alienated millions of readers and posed a growing  threat to Murdoch’s hopes of buying broadcaster BSkyB <BSY.L>.

The announcement, one of the most dramatic in the  80-year-old press baron’s controversial career, is widely seen  as an effort to prevent the crisis from spreading beyond the  News of the World to more lucrative parts of Murdoch’s empire.

The scandal has also become a huge embarrassment for  British Prime Minister David Cameron because of his close ties  to some of the figures at the center of the controversy.

Murdoch’s son James, who chairs the British newspaper arm  of News Corp, said News of the World has been “sullied by  behavior that was wrong.”

“Indeed, if recent allegations are true, it was inhuman and  has no place in our company,” he said in a statement. “The News  of the World is in the business of holding others to account.  But it failed when it came to itself.”

He praised the News of the World for “a proud history of  fighting crime, exposing wrong-doing” and setting the nation’s  news agenda. But he said the paper, which his father bought in  1969, was unviable because of the scandal.

The announcement that the paper’s final issue will be on  Sunday, July 10 may even be a signal that the famously  excessive practices of British tabloid journalism will be less  prevalent in the future.

The news came as a complete shock to its 200 staff.

There were gasps and sobbing as they were told of the  closure of the 168-year-old title, which from its earliest days  in the Victorian era sought to titillate the British working  class with sensational journalism about sex and crime.

The profits of the final edition of the News of the World,  which was acquired by the Australian-born Murdoch back in 1969  in his first foray into Fleet Street, will go to charity.

Rupert Murdoch

“No one had any inkling at all that this was going to  happen,” said Jules Stenson, features editor of News of the  World.

On the surface, it seems like a bold gamble to sacrifice a  historic title that had helped establish Murdoch in a British  newspaper industry that he has dominated in recent decades.

The closure doesn’t mean that Murdoch’s problems from the  scandal are over. Growing popular and political anger over the  phone hacking saga had spurred concerns that there could be  snags in securing government approval for News Corp’s $14  billion bid for BSkyB, of which it already owns 39 percent.

Stephen Adams, a fund manager at Aegon Asset Management,  which is one of the biggest shareholders in BSkyB, told Reuters  he saw News Corp’s move as aimed at restoring or remedying a  tarnished reputation.

“But we also critically see it as a reflection of News  Corp’s desire to progress the BSkyB bid and have full ownership  of the company,” he said.

Cameron’s right-of-centre government had already given an  informal blessing to the takeover, despite criticism on the  left that it gave Murdoch too much media power.

Rebekah Brooks

While the costs of closing the News of the World will be  modest, investors and analysts are still concerned about the  wider implications of the saga. News Corp’s U.S. shares fell  more than 5 percent on Wednesday, and edged 0.23 percent lower  on Thursday in a rising overall market.

“I don’t see how this (BSkyB) deal can go ahead. It’s  politically totally unacceptable now,” said Alex Degroote,  media analyst at Panmure Gordon. “To me, it’s an explicit  admission of culpability.”

Still, others said that any attempt to block the BSkyB deal  at this late stage would likely spark a legal challenge from  News Corp, and one the company would likely win. A delay is  likely, “but they can’t delay it forever so barring some major  development this deal is going to get agreed,” said media  consultant Steve Hewlett.

The outrage targeted at the News of the World has turned  attention on Cameron’s own links to the paper, and in  particular his friendship with Murdoch’s close confidante and  head of his British newspaper arm Rebekah Brooks.

Murdoch still faces pressure to remove Brooks, a friend of  Cameron’s. Her editorship of the News of the World a decade ago  is at the heart of some of the gravest accusations.

Cameron has already been hit by the scandal: he chose  former News of the World editor Andy Coulson as his  communications director, even though Coulson was caught up in  the hacking scandal. One of his reporters and a private  investigator had been convicted of hacking into phones of  members of the royal family, although Coulson insisted he knew  nothing about the phone hacking.

As new allegations surfaced, Coulson had to resign from  Cameron’s team earlier this year. The Guardian newspaper  reported on Thursday that Coulson would be arrested on Friday.  Police declined to comment.

SUNDAY SUN

It is not yet clear if the scandal will damage James  Murdoch, the presumed successor to his father, and other News  Corp executives such as Les Hinton, who is now running the  company’s Dow Jones operation but was previously head of  Murdoch’s British newspaper arm.

Speculation is rife that the company will turn The Sun, its  tabloid daily that is Britain’s best-selling newspaper, into a  seven-day operation rather than the current six to tap the  Sunday market. Despite difficult times for newspapers, the News  of the World is still selling 2.6 million copies a week.

The website www.sunonsunday.co.uk was registered on Tuesday  by an unknown party.

“Our view is that this does not mean the News of the World  will be closed. It will simply mean that there will be a  seven-day Sun. The stain on the brand was going to be  permanent, and this is a perfectly sensible decision,” said  Claire Enders, head of Enders Analysis Media Consultancy.

Journalists said that an emotional News of the World editor  Colin Myler had read out the announcement at the east London  newsroom where Murdoch changed the face of British journalism  in the 1980s by breaking the power of the printing unions.

News that Brooks would remain in place as chief executive  triggered anger from staff. James Murdoch told Sky News he was  satisfied Brooks knew nothing of the crimes allegedly committed  when she was editor.

Asked how staff felt towards Brooks, one reporter said  there was a sense of “seething anger” and “pure hatred”  directed towards her: “We think they’re closing down a whole  newspaper just to protect one woman’s job.”

British opposition leader Ed Miliband said Brooks should  go, echoing the view of the journalists’ trade union. The union  said some journalists at The Sun had walked out in support of  their colleagues on Thursday evening.

WAR DEAD

Investigations into phone hacking at the News of the World  have been bubbling for several years and until recently only  celebrities and other well-known figures were believed to have  been victims.

But the scandal exploded earlier this week after  revelations an investigator working for the paper may have  listened to — and deleted — the voicemail messages of a  missing 13-year-old schoolgirl, later found murdered.

The scandal deepened yesterday with claims News of the  World hacked the phones of relatives of British soldiers killed  in action in Iraq and Afghanistan. Britain’s military veterans’  association broke off a joint lobbying campaign with the paper  and said it might join major brands in pulling its  advertising.

Many of the paper’s readers are ardent supporters of the  armed forces so suggestions it may have hacked the phones of  the families of grieving service personnel only further  alienated a core readership already horrified by suggestions  its reporters accessed the voicemails of missing children and  bombing victims.

The main accusations are that journalists, or their hired  investigators, took advantage of often limited security on  mobile phone voicemail boxes to listen in to messages left for  celebrities, politicians or people involved in major stories.

Disclosure that the practice involved victims of crime came  when police said a private detective working for the News of  the World in 2002 hacked into messages left on the phone of  murdered schoolgirl Milly Dowler while police were still  looking for her.

Police have also been criticized over allegations officers  took money from the News of the World for information.   London’s Evening Standard newspaper said yesterday that  police officers took more than 100,000 pounds ($160,000) in  payments from senior journalists and executives at the paper.

Shortly before the announcement the paper would be closing  for good, advertising website Brand Republic said the paper had  lost all advertising for this weekend’s edition.

Before the controversy worsened, formal approval for the  BSkyB deal had been expected within weeks after the government  gave its blessing in principle. But it now seems unlikely for  months, although officials denied suggestions that they were  delaying a decision because of the scandal.

“The Secretary of State has always been clear that he will  take as long as is needed to reach a decision. There is no  ‘delay’ since there has been no set timetable for a further  announcement,” a government spokesman said. Some British media  reported that a decision was now expected in September.

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