News of the World shuts down amid hacking scandal

Reporting from London and Los Angeles —  Facing a tide of outrage over rampant phone-hacking, Rupert Murdoch jettisoned the notorious News of the World tabloid in an effort to protect his media empire, but the dramatic step may prove insufficient to contain the growing scandal or secure his bid to expand an already massive presence in Britain.

Murdoch is struggling to ensure that toxic fallout does not infect other parts of News Corp., a media giant with holdings from Asia to the U.S., including the Wall Street Journal and Fox News.

Update, 4:03 a.m.:
Andy Coulson, a former editor of the News of the World who went on to become a top aide to Prime Minister David Cameron, was arrested Friday morning by Scotland Yard. Coulson, 43, is suspected of authorizing payments to police officers for information during his tenure at the tabloid.

Coulson stepped down earlier this year as Cameron’s chief communications aide. Still, his arrest is deeply embarrassing for the British leader, who announced Friday that public inquiries would be set up to investigate the phone hacking scandal at the News of the World.

Most important here in Britain, Murdoch is eager to shore up his bid for BSkyB, the nation’s biggest satellite broadcaster. The surprise announcement Thursday that the News of the World would cease publication after Sunday despite enviable circulation figures and a 168-year pedigree is clearly meant to limit any damage to his controversial takeover bid, which is under consideration by the government.

“It’s like the most radical cancer surgery,” said Julia Hobsbawm of Editorial Intelligence, a media analysis firm in London. “It is an astonishing moment in British media history.”

But critics dismissed it as a cynical maneuver that would cost 200 rank-and-file employees their jobs, while doing little damage to the company’s bottom line and protecting senior executives such as his son, James, and Rebekah Brooks, who is very close to the Murdoch family.

And it may not be enough to quell the public anger.

Daily revelations of new potential hacking targets, including the relatives of murder and military combat victims, have fed the surge of popular outrage against Murdoch and News International, the British subsidiary of News Corp. Politicians who once might have feared angering the Australian-born media baron are now denouncing him loudly in Parliament.

Also, police are pressing ahead with one of the biggest investigations they have going at the moment, with reports that a former editor of the News of the World — who later became a top aide to Prime Minister David Cameron — is about to be arrested.

Still, the announcement that Murdoch was sacrificing the tabloid, the first publication he acquired outside Australia, took virtually everyone here by surprise, including the paper’s employees, one of whom likened the news to a “nuclear bomb.”

“The News of the World is in the business of holding others to account. But it failed when it came to itself,” said a statement by James Murdoch, who is chairman of News International and a senior executive of News Corp.

He was referring to allegations that the tabloid authorized the hacking of cellphones belonging to celebrities, politicians and the families of slain schoolgirls and fallen soldiers in its relentless pursuit of scoops. Police say that up to 4,000 people may have been targeted.

While the scandal has simmered for more than a year, it broke wide open this week after reports that a private investigator hired by the News of the World not only intercepted voicemail messages left for a kidnapped 13-year-old girl but erased some of them, interfering with a police investigation. The teenager’s body was later found dumped in a wood.

A number of companies pulled their ads from the News of the World in protest, and lawmakers from all three of Britain’s main political parties called on the government to reject Murdoch’s bid to take over BSkyB.

The loss of the tabloid’s estimated $61 million in annual advertising revenue would be little more than a minor blip for News Corp., which generates more than $32 billion a year.

Many analysts expect Murdoch to simply start another tabloid in the News of the World’s place, perhaps by creating a Sunday edition of the Sun, which trades in the same kind of celebrity gossip and sex-related stories. The News of the World boasts a circulation of about 2.6 million.

“It’s a typical management stunt from Mr. Murdoch. What he does is he gets rid of problems and, in this case, nobody in senior management,” John Prescott, a former deputy prime minister whose phone was allegedly hacked, told the BBC.

Pressure is mounting on Murdoch to fire Brooks, who was the editor of the News of the World at the time of the alleged hacking into the phone of the abducted 13-year-old, in 2002. She has since been promoted to chief executive of News International and is one of her boss’ closest confidants.

“I don’t think News International can hope to start moving on and dealing with these issues while she remains in post,” said Ed Miliband, the leader of the opposition Labor Party.

James Murdoch reiterated his father’s confidence in Brooks on Thursday, despite public skepticism of her denial that she knew of the hacking.

“Her leadership is actually crucial right now. It’s actually what’s been moving a lot of this forward,” the younger Murdoch told Sky News.

Brooks enjoys an extremely close relationship with the Murdoch family. She has often been spotted dining at trendy London restaurants with James and his sister Elisabeth.

Brooks is “like an adopted daughter” to Rupert Murdoch, said a former News Corp. executive who is close to both the Murdoch family and Brooks and who asked not to be identified. “He’ll do everything he can to save her.”

Shutting down the News of the World may also be an attempt to protect James Murdoch, analysts say.

This year, James Murdoch was named a deputy chief operating officer of News Corp. and is considered by many to be his father’s heir apparent. He recently relocated to New York, a move widely interpreted as an effort to put some distance between himself and the hacking scandal.

Critics have begun describing Andy Coulson, Brooks’ successor as editor of the News of the World, as the Murdochs’ chosen scapegoat. Coulson stepped down from the job in 2007, when the tabloid’s reporter covering the royal family and the private investigator he worked with were sent to jail for illegally accessing voicemails left by Princes William and Harry for their aides.

News International recently handed over files appearing to show that Coulson authorized illegal payments of tens of thousands of dollars to police officers in exchange for information during his tenure as editor.

The Guardian newspaper reported Thursday night that Coulson would be arrested Friday, a stunning fall from grace for a man who went on to become Cameron’s chief communications aide before resigning early this year because of the hacking scandal. Several other reporters and editors have already been arrested.

The scandal is proving an increasing source of embarrassment for Cameron. Besides Coulson, for whom he has always expressed support, the British leader is also friends with Brooks and her husband.

Cameron’s government is now under heavy scrutiny as it decides whether to approve Murdoch’s bid to take over BSkyB, of which News Corp. already owns a 39% share. Up to now, officials have given numerous indications that they will allow the deal.

Jeremy Hunt, the minister in charge of examining the bid, has reportedly received about 100,000 messages from the public in the last few days opposing Murdoch’s bid to expand his media footprint in Britain.

A ruling from Hunt had been expected as early as next week. But analysts say he is now likely to postpone a decision until the fall.

henry.chu@latimes.com