Phone-hacking scandal is biggest PR disaster of Murdoch’s career

Media baron Rupert Murdoch shuttered one of his signature British newspapers Thursday amid a spreading phone-hacking scandal that has damaged his reputation and threatened the globe-spanning conglomerate he has assembled over nearly six decades.

Murdoch’s News Corp. took the extraordinary step of announcing the closure of the News of the World, the company’s racy Sunday tabloid, in an attempt to stem the fallout from the newspaper’s prying into the voice-mail and cellphone accounts of hundreds of British citizens.

The 168-year-old News of the World, the widest-read paper in the English-speaking world, has acknowledged that it hired “investigators” who hacked into the phone accounts of politicians, celebrities and ordinary Britons in an attempt to develop stories. The targets of the paper’s hacking apparently included the families of British troops killed in Afghanistan, victims of the 2005 London transit bombings and a 13-year-old missing girl who was later found dead.

Murdoch, 80, has weathered criticism and crises before, most notably the near-bankruptcy of News Corp. in 1990. But the phone-hacking scandal is easily the most dire public-relations debacle of the Australian-turned-American’s storied business career.

Public outrage over the phone tapping has led to rare condemnation of Murdoch in the British Parliament and even from Prime Minister David Cameron, who has enjoyed Murdoch’s political support. Because of his outsize role in the U.K. media, Murdoch has been among the most powerful and influential forces in British politics for many years.

Although there is no evidence that Murdoch was aware of the News of the World’s illegal behavior, the scandal has shaken his dominant role in the British media establishment and has tarnished his stewardship of an empire that includes such U.S. properties as the Fox TV network, the Wall Street Journal, the New York Post and the 20th Century Fox movie studio.

The scandal has also threatened to derail News Corp.’s bid to gain control of British Sky Broadcasting, the largest pay TV provider in the United Kingdom. News Corp. owns 39 percent of the satellite company and is trying to gobble up the balance in a deal worth about $12 billion. Regulatory approval of its bid is pending, and the outcome could be an indicator of public sentiment toward the newspaper’s behavior.

Some observers suggested Thursday that the scandal could affect who succeeds Murdoch at the top of his company, which he built into a colossus after inheriting two small Australian papers from his father 58 years ago. Murdoch’s heir apparent, son James, oversees the company’s British newspaper division and announced the tabloid’s demise in its London newsroom.

Many here are calling for the dismissal of Rebekah Brooks, a former News of the World editor who is chief executive of its immediate parent company, News International. Brooks was editor of the paper in 2002 when a private detective working on its behalf allegedly hacked into the voice-mail of slain teenager Milly Dowling and erased one of the messages. But both Rupert and James Murdoch have remained loyal to Brooks. “I am satisfied that Rebekah — her leadership and her standard of ethics and her standard of conduct — is very good,” the younger Murdoch told BBC News in an interview.

The company’s stock price dipped sharply Wednesday, losing 3.6 percent in value, after Cameron called for a formal government inquiry and companies pulled ads from the News of the World. But the stock was off just 0.1 percent in formal trading Thursday and rose after hours, suggesting that investors believed Rupert Murdoch had stopped the immediate bleeding.

Murdoch has accused “wrongdoers” in the hacking but has not identified any of them. He and his executives will probably face hearings into the matter in Parliament, which could subject him to testimony under oath.

Murdoch this week appointed two Americans — News Corp. executive Joel Klein, the former chancellor of New York’s public schools, and company board member Viet Dinh, a Georgetown University law professor and assistant attorney general under President George W. Bush — to investigate the phone hacking.

Word on the News of the World’s fate came late in the afternoon in London, creating a near-perfect tabloid storm. The news came just as the last installment of the Harry Potter movie franchise was staging its world premiere in Trafalgar Square, snarling central city traffic. Talk radio shows were soon filled with news of the tabloid’s closing.

Many described the shuttering of the paper as a tactical move to head off further criticism and said it would have a negligible effect on News Corp.’s bottom line.

“The Murdochs have decided that the limb had gone gangrene, and so they had to cut it off to save the body,” said John Lloyd, director of journalism at the Reuters Institute for the Study of Journalism at the University of Oxford. “The matter decided itself. . . . Closing it is a mixture of boldness and inevitability.”

The paper, once a huge moneymaker, was considered only marginally profitable in recent years. Although it constitutes only a small part of the $54 billion News Corp. empire, the News of the World holds perhaps some sentimental value for Murdoch. As an upstart Australian newspaper publisher (he now holds dual American and Australian citizenship), he acquired the paper in 1969 after a prolonged fight with Robert Maxwell, since deceased. The paper became Murdoch’s British beachhead and generated so much profit that he was able to buy, in succession, the Sun, Times of London and Sunday Times, accounting for nearly half of Britain’s newspaper market.

Profits from these papers, in turn, helped finance Murdoch’s designs on the U.S. media, including his purchase of 20th Century Fox in 1985, which helped News Corp. launch the Fox broadcast network. He paid $5 billion for the Wall Street Journal’s parent company, Dow Jones, in 2007.

If the News of the World had continued to exist, luring back advertisers in the wake of the scandal might have taken years. Media analysts in London speculated that Murdoch would start a Sunday edition of his tabloid Sun to capture readers and advertisers lost by the News of the World.

In East London, some of the 200 reporters and editors who will lose their jobs with the paper’s demise described their newsroom as being in a daze. “It was as if a nuclear bomb had blown up,” a political editor told the BBC.

Londoners expressed sympathy for the staff members, who will produce the last edition Sunday, but not necessarily for the paper itself. At a Westminster pub called the Speaker, Roland Brown rejoiced. “Couldn’t have happened to a better lot of hacks. What comes around, goes around, so it is written, so it is said,” said Brown, dressed in gray pinstripes.

The News of the World has a long and colorful history as Britain’s premier scandal sheet. For many decades, its specialty has been its coverage of celebrities, athletes and politicians, particularly those involved in sex scandals. Over the years, it has resorted to various tactics that journalists consider ethically dubious, such as paying sources for information, hiring prostitutes to “sting” celebrities and using hidden cameras.

It has, however, uncovered some major stories, such as the revelation that U.S. Olympic swimmer Michael Phelps had smoked marijuana at a party in 2009 and that Prince Harry had consumed alcohol and marijuana as a 17 -year-old in 2002.

Although its current circulation of 2.8 million is a third of its postwar peak, the paper is still far larger than the most widely circulated U.S. newspaper (the Murdoch-owned Wall Street Journal, at 2.1 million) — a fact made even more impressive considering that the United Kingdom’s population is roughly one-fifth that of the United States. Among the tabloid’s former editors: Piers Morgan, who is a talk-show host on CNN and a judge on “America’s Got Talent.”

Farhi reported from Washington. Special correspondents Karla Adam and Eliza Mackintosh in London contributed to this report.

William Booth is The Post’s Jerusalem bureau chief. He was previously bureau chief in Mexico, Los Angeles and Miami.
Paul Farhi is The Washington Post's media reporter.
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