Fantastic Mr. Fox

Rupert Murdoch Scandal: Business Debacle as Coulson Faces Arrest

The mogul may be trying to save top execs by closing a tabloid. Howard Kurtz on the damage to News Corp.

It is either poetic justice or a desperate attempt by Rupert Murdoch to stop the bleeding.

By closing down News of the World, the scandal-driven London tabloid that itself became engulfed by scandal, Murdoch is taking a drastic step that is virtually without precedent. But then, it’s rather unprecedented for a phone-hacking investigation to cause a spate of journalistic resignations and arrests—with one of the biggest fish, the paper’s former editor and ex-adviser to Prime Minister David Cameron, taken into custody Friday morning.

“News of the World is one of the rocks of Fleet Street, of British journalism,” says Murdoch biographer Michael Wolff. “Man! These guys are completely freaked out. They are all vulnerable—all of them.”

With the latest revelations about the tabloid accessing the phones of terror victims and a missing 13-year-old girl who turned out to be murdered, the story moved beyond the spectacle of rogue journalists chasing celebrities and into the sickening realm of harassing ordinary people touched by tragedy. London police say more than 4,000 people have been identified as potential victims of the paper’s stable of private detectives.

After playing down the disclosures for years as the work of a few rotten apples, the abrupt Murdoch move—announced Thursday by his son, James—represented a tacit acknowledgement that the critics were right: The paper’s very culture was corrupt.

“It was shocking,” says Sarah Ellison, a Vanity Fair contributing editor covering the story. “But when you think about it for two minutes, it’s purely cynical. It’s a way of sacrificing something Murdoch doesn’t care about to save what he does care about, including Rebekah Brooks , his prized News International editor in London. They seem to be sacrificing lower-level people in order to save the people who are in charge.” Brooks was very much in charge as News of the World editor during much of the misconduct, but it is the paper’s 200 employees who are now losing their jobs.

It’s not quite right to say the newspaper means nothing to Murdoch. It was the first British paper he bought, back in 1969, a key building block in what would become a global empire. As Ellison says, “it was the place where he established himself as the scourge of the British upper classes.” But whatever emotional attachment Murdoch may have felt about a paper with a circulation of 2.6 million was outweighed by the cold-eyed judgment that it had become a liability.

Financially, News of the World is not a vital component of a mega-corporation that stretches from Fox television and movies to The Wall Street Journal to the New York Post to the Times of London. (Murdoch’s Sun seems poised to partially fill the void by launching a Sunday edition, now that someone purchased the Web address One analyst told the Journal the tabloid is valued at about $650 million, or 1.4 percent of the parent company’s market value. News Corp. shares lost $1 billion in value on Wednesday but ended flat Thursday.

But the News of the World debacle threatens to endanger the far more lucrative Murdoch takeover of British Sky Broadcasting, which has been awaiting government approval. London’s Channel 4 quoted a source close to Britain's culture secretary as saying the deal might have to be reconsidered on competitive grounds because the loss of the paper could place too much of the country’s remaining media power in one company’s hands.

In a daring bit of jujitsu, the Murdoch team went from defending the 168-year-old paper to trashing it, in both senses of the world. If detractors were denouncing News of the World, the owners would outdo them. James Murdoch said in a statement the tabloid is being shuttered because the allegations, if true, were “inhuman” and News of the World’s reputation has been “sullied by behavior that was wrong.”

“Stopping the story is one thing, stopping the presses is another,” says Frank Sesno, director of George Washington University’s School of Media and Public Affairs. “It does take your breath away. It would be like The New York Times closing down after Jayson Blair,” the serial fabricator who was exposed in 2003.

Sesno sees the fallout extending far beyond London: “This tarnishes Murdoch and News Corp. and potentially the Murdoch brand. That’s inevitable. He is in deep damage-control mode right now. This is his Titanic hitting the iceberg, and he has to worry about the rest of the fleet behind him.”

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Even when the paper closes Sunday, a spate of investigations in Britain guarantees that the story won’t fade any time soon. Ed Miliband, leader of the opposition Labour Party, has called for Brooks to step down as chief executive of News International. And Cameron himself has demanded a probe of the paper’s reporting practices. Former News of the World editor Andy Coulson, who had been working as the prime minister’s communications director, resigned under pressure in January as the scandal deepened, and was arrested Friday.

Other British papers have been feasting on their rival’s carcass. Alan Rusbridger, editor of The Guardian, tweeted that “James Murdoch has... finally confessed to everything we said he was doing back in 2009.”

The Telegraph reported that Brooks “faced angry scenes at the paper as she broke the news to journalists. There were reports she had to be escorted from the offices by security guards for her protection.”

The Telegraph also ran a headline destined to become a classic: “Goodbye, cruel World.”

Wolff, the editorial director of Adweek, says the credibility of News Corp. executives “has been utterly destroyed. Everything they’ve said about this proved to be utterly false.” And he says it is hard to believe that Murdoch was in the dark: “Rupert is called about everything. He lives and breathes for those tabloids in London.”

That what-did-he-know question may linger as the investigations mount. “It’s a classic case in which the coverup is worse than the crime,” says Ellison, “and it has several Nixonian elements that will resonate with the American audience.”