How safe is the Murdoch empire?

At the centre of the News of the World hacking scandal stands its owner Rupert Murdoch. These allegations have rocked his Newscorp empire to its core as politicians debate the wisdom of allowing one man so much power, writes John Daly

IN the end, the closure of the 168-year old News of the World became an inevitable reality that not even the legendary business savvy of Rupert Murdoch could save.

Having withstood the public and political outcry resulting from the scandal where up to 4,000 phones may have been hacked, it was the mass desertion of advertisers that hammered the final nails into the tabloid’s coffin.

In a decision to cease publishing the paper after tomorrow’s final edition, the company said: “The good things the News of the World does have been sullied by behaviour that was wrong. The News of the World is in the business of holding others to account. But it failed when it came to itself.”

At one point, the News Of The World was the most profitable newspaper in Rupert Murdoch’s empire, but as major advertisers like Sainsburys, O2, Ford and Boots released statements earlier this week that they would not be taking out advertising in future editions, the negative momentum reached a level that could not be stopped as its weekly revenue of €735,000 ebbed away. The announcement of the shock closure came hours after the Royal British Legion dropped the paper as its campaigning partner, expressing “revulsion” at allegations that war widows’ phones may have been hacked. News Group Newspapers Ltd, the unit responsible for the News of the World and The Sun, reported an operating profit of €20.3m in the year ended June 27, 2010, compared with an operating loss of €17m in 2009.

Murdoch, renowned as a risk taker and ruthless entrepreneur throughout his career, caught the international business world by surprise with the swiftness of the closure — underlining how deep the scandal had penetrated and how much it might threaten the entire empire. It marks the first newspaper closure in Britain since 1995, when, ironically, Murdoch also shut down the Today tabloid.

He bought the News Of The World after an extended corporate battle with Robert Maxwell 42 years ago, immediately taking the paper in an even more populist direction, and using it as one of the financial foundations for his parent company, News Corporation. The sacrifice of the News Of The World is undoubtedly related to Murdoch’s ongoing acquisition of the 61% stake in BSkyB he doesn’t already own, the biggest deal of his career that will ultimately generate far greater profits than those made by the paper.

The hacking scandal came at exactly the wrong time for Murdoch, as politicians debate the potential extent of News Corp’s power through the BSkyB takeover.

“We have let one man have far too great a sway over our national life,” Labour lawmaker Chris Bryant told Parliament in London in an emergency debate this week. “Murdoch is not resident here, does not pay tax here. No other country would allow one man to garner four national newspapers, the second largest broadcaster, a monopoly on sports rights and first-view movies.”

The News Of The World and its stablemate The Sun have successfully backed the winner in every British election since Margaret Thatcher in 1979.

The potential threat to the BSkyB deal as a result of the hacking scandal has permeated down to the core of News Corp, with investors’ nervousness reflected in the share price swings over recent days. The BSkyB share price shed 5% during the week, wiping out €740m, while News Corp shares slid 5.2%, equal to €682m off Murdoch’s 38% stake. As many of the hedge funds who had bought into the BSkyB deal in the hopes of quick profits deserted the shares due to the possibility of a protracted political debate that could yet scupper the takeover, the British government has so far refused to suspend consideration of the takeover. However, the presence of more than 140,000 submissions of concern to culture secretary Jeremy Hunt may force a postponement of any decision until the autumn.

Industry analysts have speculated News Corp will attempt to retain its News Of The World readership with a new title, or possibly publish The Sun over seven days. Searches show website names TheSunOnSunday.co.uk and TheSunOnSunday.com were registered two days ago.

It remains to be seen whether Murdoch’s closure of the paper will confine the commercial fallout to Britain, as concerns mount that the contagion will spread across the Atlantic to his enormous US media empire, which includes Fox TV, 20th Century Fox film studios, The Wall Street Journal and The New York Post — all of which generate more than €22 billion in yearly revenue. Up to this week, the hacking scandal went relatively unnoticed by the US media, but front page headlines in The New York Times and subsequent television news stories over the past two days have added to concerns that the company’s possible questionable practices may yet spawn an American dimension. By acting swiftly in putting the News Of The World to the sword, Murdoch has avoided a drawn-out debacle that would have seen the paper impaled further on the spike of public outrage. But the question remains, will it be enough?

Having cut his editorial teeth as a sub editor on the Daily Express, Murdoch took over the Adelaide News on the death of his father in 1953, and quickly demonstrated his faith in snappy headlines and scandal to generate big profits. His status as a media baron began with the 1964 launch of The Australian — the country’s first national paper. In 1968, he returned to Britain to take over the News Of The World, adding The Sun shortly after. In 1976, he bought the New York Post and The Star, and the following year The Times and The Sunday Times in Britain. In 1986, he won a drawn out industrial dispute with British unions in the move to Wapping, followed by a move into visual media with the purchase of 20th Century Fox film studios and a string of US regional TV stations. The following year, he launched Fox News.

So all-encompassing had his commercial reach become at this point he became an American citizen to overcome constitutional laws pertaining to foreign ownership of assets. In August 2007, Murdoch enticed the initially reluctant Bancroft family to sell their stake in Dow Jones for €3.5bn, allowing the takeover of The Wall Street Journal. Murdoch has been listed three times in Time magazine’s Top 100 most influential people in the world, and ranked 13th in Forbes’ 2010 Most Powerful People in the World list. His personal fortune is estimated at €4.4bn. Having turned 80 in March, Murdoch remarked: “I’ve been around 50 years. When you’re a catalyst for change, you make enemies — and I’m proud of the ones I’ve got.”

Getting to know: Rupert Murdoch

Age: 80

Born: In Melbourne, the only son of Sir Keith and Elisabeth Murdoch, a wealthy newspaper owning family.

Education: Attended the elite Geelong Grammar School, and later read Philosophy, Politics and Economics at Worcester College, Oxford.

Career: Took over the family business aged 22 on the death of his father, quickly adding the Sunday Times in Perth, The Daily Mirror in Sydney, and The Dominion in New Zealand. Launched The Australian in 1964, and bought the Sydney-based Daily Telegraph in 1972.

Family: Married three times, first to Patricia Booker in 1956, with whom he had a daughter, Prudence. His 1967 marriage to journalist Anna Torv produced three children — Elisabeth, Lachlan and James. In 1999, Murdoch married Wendy Deng, a Yale graduate and vice president of Star TV. They have two children, Grace and Chloe.

Why in the news: Has closed down the 168-year old News Of The World as a result of the phone hacking scandal

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