Amid Scandal, Murdoch Pulls Plug on News of The World

Rupert Murdoch may have salvaged News Corps‘ (NASDAQ:NWSA) brand and legacy today in a controversial decision to shut down the company’s subsidiary “News of the World” tabloid. The UK based publication has a weekly circulation of 2.6 million and a 168 year print history, but all that is set to end as COO Jamie Murdoch announced this morning, “This Sunday will be the last issue of the News of the World…Currently, there are two major and ongoing police investigations. We are cooperating fully and actively with both. We have also admitted liability in civil cases…All of the News of the World’s revenue this weekend will go to good causes.”

The soon to be out-of-print paper had become the target of popular and political vitriol in Britain after allegations surfaced that the tabloid had hired private investigators to hack the cell phone of a missing young girl, who was later found to have been abducted and murdered. The girl, 13 year old Milly Dowler, was kidnapped by an assailant on her walk home from school in 2002. Her remains were discovered six months later. Levi Bellfield, the accused perpetrator, was tried and sentenced to life imprisonment for murder and kidnapping in a highly publicized trial in Britain that concluded in June of this year.

News of the World’s role in the scandal emerged when officials at Scotland Yard discovered that Dowler’s cell phone had been hacked, and eventually traced the breach to an investigator hired by the newspaper. Journalists at the tabloid reportedly deleted voicemail messages from Dowler’s phone (while she was still missing) in an attempt to clear space on the message box so they could be privy to information left by new callers. Milly’s family and police on the case took the deleted messages as evidence that she was still alive.

After the extent of these allegations surfaced, political leaders in Britain excoriated the behavior of the paper. P.M. David Cameron commented, “If they are true, this is a truly dreadful act, and a truly dreadful situation,” while Labour party rep. Chris Bryant added, “[its] not just a paper out of control, that’s not just a paper believing it’s above the law, it’s a national newspaper playing God with a family’s emotions.”

Other media outlets joined in criticism of the tabloid, with the Financial Times calling for Rupert Murdoch to fire any staff involved with the incident, including the newspapers’ CEO Rebekah Brooks. The executive had initially denied any knowledge of the hacking incident, and gained Murdoch’s support in a public statement yesterday, though it appears that the evidence against the paper coupled with public outcry moved News Corps’ overseer to change his mind.

Perhaps even more appallingly, News of the World has been embroiled in several other high profile phone hacking scandals. In 2007, the paper’s top UK editor resigned and served jail time following reports that the paper had attempted to hack communications among royal family members. The paper will also soon settle a number of lawsuits brought on by 5 British celebrities, including actors Jude Law and Siena Miller, who accused the tabloid of hacking their phones.

Murdoch’s decision to shut down the paper today comes as something of a grand apology, but it is unclear how popular sentiment in Britain will be altered by the move. James Murdoch spoke at length about his feelings of remorse, “While we may never be able to make up for distress that has been caused, the right thing to do is for every penny of the circulation revenue we receive this weekend to go to organisations – many of whom are long-term friends and partners – that improve life in Britain and are devoted to treating others with dignity,”

News Corp. (NASDAQ:NWSA) is seeking to acquire British media company, “British Sky Broadcasting Group” (NYSE:BSY) having made a 7.8 billion pound bid that is currently under government review. The timing of the News of the World scandal does not bode well for its parent-company’s takeover prospects. The tabloid currently employs 100 staffers who may soon be out of jobs. Murdoch addressed them in his statement as well, saying, “for colleagues who will leave the Company. Of course, we will communicate next steps in detail and begin appropriate consultations.”

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