How at Risk Is Rupert Murdoch’s Reputation?

Rupert Murdoch might like us to believe his decision to abruptly shutter Britain’s best-selling but scandal-plagued News of the World was solely a matter of journalism ethics, “to prevent a situation like this from happening again.” Not in any News Corps.’ newsroom, it won’t.

Rupert Murdoch during his News of the World takeover in the late '60s.

Not to belittle his dedication to high-quality reporting, but it seems Murdoch also had his own interests in mind. Facing the most potentially damaging PR debacle of his six-decade career, Murdoch made the drastic move to contain financial and political fallout (and quell public outrage) before it overtook his global empire.

“It’s like the most radical cancer surgery,” Julia Hobsbawm, a media analyst with the firm Editorial Intelligence, told the Los Angeles Times. “It is an astonishing moment in British media history.”

As the reality of Murdoch’s maneuver sets in, that sentiment is echoed by just about everyone who cares. There’s much disagreement, however, over how backlash from the News of the World scandal — branded by House of Commons’ lawmakers as “a stain on the character of British journalism” — will impact the aging mogul’s reputation.

With the “bold decision” to stop News of the World‘s presses, “Murdoch has shown what a brilliant operator he really is,” said Louise Cooper, a markets analyst at London’s BGC Partners. “This, to me, is Murdoch taking back control.”

By sacrificing the historic tabloid (and the jobs of its 200 employees), Murdoch kept the bulk of the crisis confined to the U.K., preventing other News Corp. businesses — notably its lucrative U.S. properties, including 20th Century Fox, Dow Jones and Fox TV networks — from getting bloody by association. The action also displayed Murdoch’s staunch unwillingness to jeopardize his $12b bid to control satellite-TV provider British Sky Broadcasting (BSkyB).

Until this week, Murdoch’s plan to take over BSkyB looked like a sure thing; final approval was expected from government regulators as early as next week. But mounting allegations of voicemail-hacking and police pay-offs exposed NotW as part of a Murdoch-masterminded “corporate culture gone mad,” sparking last-minute protests from both legislators and citizens. Reviewing the 135,000 newly submitted letters of opposition will likely delay the decision until September.

“The British public simply won’t ever accept that one unscrupulous media baron should own more than half our commercial media,” said Rick Patel, executive director of online activism community

Wall Street still seems OK with it, though. Investors are betting on Murdoch’s proposal going through as planned, but anticipate the hold up — and ongoing NotW salaciousness — will cause some traders who thought they’d see quick summer profits to bail out.

Others insist Murdoch had no choice but to put an end to News of the World, regardless of its proud (until recently) 168-year history and slumping (but enviable) circulation.

“The News of the World is not just a paper out of control,” said U.K. lawmaker and phone-hack target Chris Bryant. “It’s a national newspaper playing God.”

A Murdoch-masked demonstrator protests with political puppets.

Murdoch may consider that a compliment. But it’s evidence that his options for NotW were severely limited: Damning revelations against the tabloid had spurred widespread reader revulsion, and advertisers withdrew in a mass exodus. How long it would take to repair the damage was impossible to tell.

Wrongdoers turned a good newsroom bad,” said son-of-a-scion James Murdoch, announcing that this Sunday’s ad-free edition would be NotW‘s last.

Along with the “wrongdoers,” though, the tabloid’s “loyal staff” — most of whom hadn’t been there in the early 2000s, when the phone-hacking occurred — would pay for their predecessors’ transgressions.

No wonder “a mood of shock, disbelief and anger” fell over the NotW offices: Staffers with no connection to the scandal had already been barraged with abusive messages from outraged (former) readers, blaming them for the “egregious behavior” of long-gone reporters. Now, they were out of jobs. (But axed NotW employees could apply for open News Corp. positions. Not so bad, after all!)